Genius or clueless? The jury is out on the architect of the Big Society

David Cameron's director of strategy has an informal dress sense that infuriates traditionalists. There's talk of clipping his wings but the PM will have none of it

"Who the hell is that?" asked one Downing Street veteran the morning after David Cameron arrived in power. After all the turmoil of the coalition talks and waving goodbye to New Labour, the sight of Steve Hilton padding around No 10 in his socks was too much.

Twelve months on, he is still there, and still shoeless no matter how senior the visiting dignitary or grave the decisions being taken. The 41-year-old director of strategy often stays in his cycling gear, or, when "smartened up", will wear jeans and a barely ironed shirt.

The brains behind the Tory detoxification, Hilton transformed the Conservatives from the "nasty party" to the home of cycling, tieless Cameroons who oscillate between hugging huskies, hoodies and trees. He is also the architect of the Big Society, which gets a fresh push this week. (Detractors refer to him as "Big Socks".)

The fact that, in all his dishevelled glory, he has kept the trust and ear of the Prime Minister is proof of how central he is to the Cameron project. Yet opinion is split on whether Hilton is a political genius or a deluded menace unsuited to Whitehall. Supporters and critics use the same language. He is said to be impatient and decisive; relentlessly enthusiastic and determined; blunt bordering on rude, with a diva-ish streak if things do not go his way.

Those who know him best describe a Jekyll and Hyde character, polite one minute before blowing his top the next. When the dust has settled on a major row, he will suggest going for drinks – an offer that is not always taken.

A key figure in the Notting Hill set of modernising Tories, his elevation to No 10 follows a humble upbringing as the son of Hungarian refugees who met at Heathrow airport where they both worked. (They dropped their family name, Hircksac.) His father left for Hungary when Steve was about five and did not contact his children again. When Steve later tried to trace him, he discovered his father had died.

Hilton Jnr won a scholarship to Christ's Hospital School, West Sussex, and later read philosophy, politics and economics at New College, Oxford, with Ed Llewellyn, now Cameron's chief of staff. Hilton met Cameron when they both worked for the Tories in the early 1990s – he for the advertising guru Maurice Saatchi and Cameron for the Chancellor, Norman Lamont. During his time with Saatchi, Hilton created the demon-eyes poster targeting Tony Blair. Saatchi later commented that Hilton reminded him of himself as a youth.

After his spell in Conservative HQ, Hilton set up Good Business, a consultancy advising firms such as McDonald's and Coca-Cola on social responsibility. He was so appalled at the Tory drift to the right under William Hague, he is said to have voted Green in 2001. Post-2005, his pet themes of going green, social action and community spirit were transferred to the Cameron project. Policy reviews were headed by Bob Geldof and Zac Goldsmith, while Cameron donned Converse trainers to weed community gardens.

It has not all been plain sailing. After Hilton suggested the Tory leader cycle to the Commons, a photographer snapped Cameron's chauffeur, who was following behind with Dave's shoes and briefcase. A trip in July 2007 to rebuild an orphanage in Rwanda, to show the caring side of the new Tories, descended into chaos when a local journalist asked why Cameron was not at home with his constituents whose homes were inundated with flood water. And, in October 2008, Hilton was arrested and fined on a train from the party's annual conference after a dispute about a ticket.

With the party preparing for the next general election, Hilton upped sticks and moved to the United States with his wife, Rachel Whetstone, who had become vice-president at Google and had to spend time at its headquarters. Whetstone was political secretary to Michael Howard when he was Tory leader. Despite his wife's hi-tech credentials, Hilton does not do email. Anyone who tries to contact him gets an automated message suggesting they contact his assistant.

The Hiltons were godparents to Ivan, the Camerons' disabled son who died in 2009. Whetstone had an affair with Viscount Astor, a Tory grandee and Samantha Cameron's stepfather. After a rift between the two couples – Whetstone was banned from the Cameron family home – they are once again on good terms.

Having returned to London, Hilton was a key player in a tight-knit team in opposition who could pull small levers at the centre and make big things happen. Now, despite being in the centre of the government, his levers are big but, when he pulls them, almost nothing happens.

"He likes to go from good idea to announcement quickly," says an admirer. "That's not how the Civil Service works." He gets intensely annoyed with bureaucracy. Cameron's "enemies of enterprise" speech, which provoked anger from the Sir Humphreys, had the Hilton stamp all over it.

He regularly clashed with Andy Coulson, the communications chief forced to resign earlier this year over his alleged involvement in phone hacking while editor of the News of the World. Coulson's exit ended years of battles between the spinners and the policy wonks, where Hilton's "airy-fairy" ideas were often halted by the communications team. "Cock-ups and bonkers ideas are still caught far too late," says one Tory briefer.

Hilton shares an office with the Liberal Democrat strategy adviser Polly Mackenzie, who acts as Nick Clegg's eyes and ears in the heart of No 10. Disagreements are frequent. One row became so heated it could be heard by the Prime Minister in his study next door. Rumours are now circulating that Mackenzie is looking to change jobs.

However, there is also talk that Hilton's wings are being clipped. The man with an aversion to formal job titles is struggling in an archaic system obsessed with process and protocol. Against a backdrop of economic stagnation, war in Libya and rows over health, defence and justice, the creator of WebCameron is struggling to make himself relevant. Having earned a reported £270,000 in opposition, official Cabinet Office figures show he is now paid only £90,000.

Tory traditionalists' patience is wearing thin. Hilton told them to pipe down and to obey his pre-election bulletins on "cool examples of the post-bureaucratic approach", but the absence of a clear Conservative majority has created space for grumbling about the party's direction. Hilton is likened to Stewart Pearson, a PR guru from the BBC's The Thick of It who obsesses over tie-wearing and speaks gibberish. Demands for a tougher stance on Europe, crime and immigration are never far from the surface. The coalition with the Liberal Democrats has fed the idea that the government has shifted too far to the left.

Amid suggestions that Hilton's "power base is being eroded", this week marks a fightback with a renewed focus on the Big Society – his real pet project. The principles behind it "are being turned up to 11", says one enthusiast. But the phrase itself is being used much less, as polling repeatedly shows the public believes it is a cover for cuts. Key initiatives have not always panned out well.

A transparency drive to publish all Whitehall spending over £25,000 ended in calamity when a "WikiLeaks volume of information" included sensitive contracts that should have been redacted. Hilton is a policy obsessive but fails to run the "Daily Mail check" to see how an idea with the best of intentions could be spun by an unsympathetic newspaper. The attempt to measure the well-being of the nation, as well as the wealth, is also classic Hilton. While it was mercilessly lampooned in Fleet Street, in Downing Street no one was allowed to refer to the "happiness index" and it was straight faces all round.

Those who know him least well find him "plainly preposterous". People imagine him sitting cross-legged like a Buddha in No 10, dispensing his new-age wisdom. "I don't get the impression he uses the word 'Thank you' very much in his day-to-day life," says a regular visitor.

Yet among Hilton's core staff there is immense loyalty. Despite the tantrums, his policy team will work their fingers to the bone. Few disagree with him in meetings, fearing they might be breaking consensus on the emperor's new clothes.

At the turn of the year there was criticism that he spent too much time philosophising in the bunker, with messages handed down through a cabal of loyal disciples. At meetings, people would talk cryptically that an idea was "something Steve would like", although few could claim to have ever met him.

Since then things have changed. He has been more hands-on in meetings and has been getting out and about to Big Society projects. His advisors visited a knitting circle. With all the pacing their boss does in the corridors of power, let's hope they knitted him a new pair of socks.

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