Mr Letwin will say the old free market argument has been won

In a speech setting out the party's principles he said the old economic arguments were over and that society was the new ideological battle ground.

Labour says the Tories have no new significant policies and David Cameron has been dubbed the "heir to Blair".

But Mr Letwin said the Tories differed "radically" from Labour's top-down approach towards society.

From Beijing to Brussels, the free market has won the battle of economic ideas Oliver Letwin

In the speech to the Policy Exchange think tank, Mr Letwin, the Conservative policy review chair, said the old arguments about capitalism versus socialism had practically ended with the Thatcher government.

"From Beijing to Brussels, the free market has won the battle of economic ideas," he said.

He said the victory had left a "hiatus in political thought", with which the Conservatives had struggled to deal during "a decade of disarray and enforced reflection".

'Socio-centric' politics

But the party had now recognised that "politics, once econo-centric, must now become socio-centric".

He said Labour saw the state as the "proper provider of public services and of well-being through direction and control".

Targets, reorganisations and initiatives have been imposed on schools, hospitals, the police and councils, he said.

It undermines and ignores the essential role of government in helping liberate peoples' potential Ed Miliband, minister

But the Conservatives would put in place frameworks to allow individuals and organisations to "act of their own volition in ways that will improve society by increasing general well being".

Cabinet Office Minister Ed Miliband said the speech showed the Tories opposed an "enabling state".

"It undermines and ignores the essential role of government in helping liberate peoples' potential through strong and well-funded public services," he said.

While Labour wanted "a partnership between an enabling state, voluntary sector and communities", a Conservative government would use individuals "as an excuse... to abdicate its responsibilities to fund public services".

Mr Cameron set out to change the Conservative Party when he took over as party leader in December 2005 and has faced opposition from within his own party ranks to some of his reforms.

But Prime Minister Tony Blair has said the Conservatives have failed to find a "strategy for government", preferring to "charge off in any direction which the popular bugle sounds".