Michael Settle talks to Conservative leader David Cameron and uncovers his thoughts on the Union, the Barnett Formula and the party�s way forward.

The view of the Thames David Cameron sees from his suite of offices overlooking Victoria Embankment was once enjoyed by James VI of Scotland and his ambassadors to the English court before the crowns were united in 1603.

Scotland House as it was known became New Scotland Yard in the late 19th century and today bears the name of Norman Shaw South after Richard Norman Shaw, the Edinburgh architect, who designed it.

At the head of a modern-day court of sorts, the Conservative leader looks relaxed and refreshed in a white open-neck shirt as he lounges on his green Commons sofa. And so he should.

Riding high in the opinion polls, an extra 256 council seats banked in England and Wales, Boris Johnson ensconced in City Hall as London mayor and last night's victory in Crewe and Nantwich - the first Tory Westminster by-election win for 26 years - one could even forgive the Tory leader for looking smug.

But he is adamant: no Conservative chickens are being counted.

Changing landscape
"We have lost so many times, we've lost so many elections, we've been behind so long, it's hard-wired into our souls, that there should be no complacency, that we have to win every vote and deserve to."

Yet even with the merest wink of complacency being banned, the 41-year-old shiny-faced leader acknowledges the political landscape is changing - in two regards.

"One is that people are beginning to feel it's time for change. These people (Labour) have had 11 years. Some good things were done but they've run out of steam, they've run out of ideas, they've run out of our money and they look increasingly desperate."

The second is a bigger sense of change. "People are beginning to see the progress that can be made through big spending, big state intervening, big clunking centralised government is coming to an end and people are ready for something that's more local, more devolved, more socially responsible rather than state-controlled ... There is a sense the tide of ideas is turning away from Labour and towards us."

Progressive ends
Today, when Mr Cameron stands on the conference podium in Ayr in what he hopes will be a victory speech, his mantra will be "Conservative means for progressive ends". The adjective "progressive", of course, an echo from the Blair years.

The Tory leader points to his plans to reform welfare and shave £3bn off the Incapacity Benefit bill.

Pointing out how the Labour policy of just throwing money at the problem does not solve the underlying cause - worklessness - he explains: "Genuine welfare reform is not: Tories get tough on welfare scroungers; it's Tories with progressive means of reducing poverty.

"The reason for involving the private and voluntary sectors and creating new businesses that are about getting people off welfare is not some sort of bizarre Thatcherite privatisation programme. It is recognising the examples from around the world about genuinely compassionate organisations that understand the long-term personal and emotional needs of those people on benefit have been far better than the state organisations at getting them out of welfare and into work."

It is a "brilliant example", he declares, of Conservative means - private sector, voluntary sector, payment by results, looking at each case individually - rather than "big clunking state to deliver the progressive end which is the reduction of poverty".

The Union
No doubt, 400 years ago, the politicking at Scotland House was about Scotland's relationship with England. Remarkably four centuries on, the subject by the river remains the same.

Again the word "progressive" falls from Mr Cameron's lips as he insists that the Tories in Scotland have to be the "strong, centre right, pro-family, pro-enterprise, pro-Union party".

He sees, on the back of the Wendyrendum fiasco, a golden opportunity for the Scottish Conservatives to be the main beneficiaries from the Unionist vote by portraying themselves as the "straightforward party of the Union", who will defend it at all costs in any referendum.

Gordon Brown, he argues, is "playing games with the Union" by risking a referendum at a time of his deepest unpopularity. "There's a really big opportunity because Labour have completely screwed up on the Union with Bendy Wendy all over the place," he declares.

Yet, Mr Cameron stresses: "It's not enough for Scottish Conservatives or Conservatives more generally to say we support the Union. Our success or failure plays a part in this. If we succeed, we will help the Union succeed, if we fail - and in the past in Scotland we have failed - we let down the Union. There is a real link between making sure we are offering people a modern, successful centre right party, putting forward progressive ideas about the future of our country, and the strength of the United Kingdom."

Solid Goldie
Today, the Tory leader will seek to contrast his favourite political aunt, Annabel Goldie, with her Labour counterpart. "Annabel has proved herself as solid, reliable, someone who delivers, someone whom the Scottish people can look up to and trust. The contrast between solid Goldie and Bendy Wendy is a pretty good one."

But the cosying up of Ms Goldie with Scotland's First Minister is unsettling some Tories as they understand how Alex Salmond believes a Conservative Government in London will be a godsend to his goal of Scottish independence.

Salmond the loser
Mr Cameron bristles. "If Alex Salmond thinks there's some clever game he can play about building on Scottish resentment against a Conservative Government in England to help break up the Union, forget it. I will do everything I can to stop that from happening."

The Conservative leader believes the SNP leader is on a "long-term lose situation" because "for all his brilliance as a politician, great manoeuverer, great communicator, at the end of the day, Alex Salmond is someone who wants to break apart the United Kingdom and the majority of Scottish people do not want that". He stresses: "He may sometimes feel he is in a no-lose situation but in the end his ticket is a losing one."

PM of the UK
At Westminster, there are Tory MPs who feel Scotland is a lost cause for the party, that Mr Cameron should jettison his Unionism and entrench Conservative rule south of the Border. But this is anathema to the would-be premier.

"Some people say we're mad: you've a much better chance of being the Prime Minister of England. Well, I don't want to be the Prime Minister of England, I want to be the Prime Minister of the United Kingdom."

Unionism, he insists, runs very deep in the Conservative soul. "Sometimes I'm not sure everybody understands this, if you stand in a room of Conservatives slap bang in the middle of Nottinghamshire, you might expect there'd be a lot of: "Oh, the Scots are taking our money and they're coming here and voting and telling us what to do.' But, actually, you just stand on a box in the middle of that room and you say: I want to be the Prime Minister who keeps the United Kingdom together and I don't want to be the Prime Minister of England, I want to be the Prime Minister of the United Kingdom' and they cheer to the echo.

Of course, there are people who are concerned about the Barnett Formula and all of that but there's a very strong sense in the Conservative Party that the United Kingdom is bigger than all of us."

Barnett Formula
On the Barnett Formula, Mr Cameron does not spell out explicitly what he plans to do but the message is clear: its days are numbered. He makes clear: "If we replace the Barnett Formula with a needs-based formula, Scotland has very great needs and Scotland will get very great resources."

Pressed about the formula's future, he insists: "This cannot last forever, the time is approaching."

But he is cautious. "I don't believe in going out there and whipping people up about this because it's wrong. To me leadership on this occasion is about explaining to English voters that while the Barnett Formula should not go on forever and things will change, there is no pot of gold there; that is leadership rather than appealing to a sense of fake English grievance about this."

Asked if, therefore, he feels the formula is coming to the end of the road, Mr Cameron replies: "Yes, that's right," noting: "I want this to happen in a consensual, sensible, non-inflammatory way and that's why I've been so reticent about it."

Fiscal autonomy
As for giving Scotland more powers, the Tory leader points to the Calman Commission but appears not to be ruling anything in or out.

"My gut feeling is that we mustn't do anything that sets us on a course to separatism and we need to find a comfortable and secure resting place where people feel comfortable that devolution can work and the Union can work."