Leading article: The looming challenge for Cameron's Conservatives

The Tory leader needs to make it clear what his party stands for

David Cameron's achievement over the past four years is clear. The Conservative Party he inherited in 2005 was a demoralised rabble apparently doomed to perpetual opposition. Now, as delegates arrive in Manchester for the party's annual conference, they do so in expectation of returning to power at next year's general election. They have Mr Cameron to thank for that change in their prospects. By overhauling the party's priorities and ditching some of its voter-alienating obsessions, he has made the Conservatives look fit for government in modern Britain.

This has been more than a superficial makeover. In a number of areas the Conservatives have some genuinely progressive policies such as enabling parents to set up their own schools and allowing charities to take a more active role in the delivery of public services. There has been substantive change elsewhere too. The robust stance the Conservatives have taken on bankers' remuneration, the pledge over the weekend to take on the "cartel" of the energy industry, and the opposition to plans for a third runway for Heathrow airport show that they are prepared to stand up to powerful vested commercial interests.

But though the Tories gathering in Manchester have good reason to be optimistic, there are also lingering question marks about the nature of the party Mr Cameron leads. One concerns the Conservatives' economic credibility. Mr Cameron's shadow chancellor, George Osborne, was unconvincing at key points in the financial crisis, most notably when he opposed the nationalisation of Northern Rock. The party's response to the recession has also been disconcertingly one-note. Mr Cameron and his party talk incessantly of "Labour's debt crisis". And the budget deficit is indeed alarmingly high. But there are other pressing economic problems facing the country, not least spiralling unemployment. Mr Cameron will unveil proposals this week, many of them sensible, for a scheme "to get Britain working again". But the fact remains that he has had little to say about spiralling joblessness over the past year. Moreover, to begin slashing government spending too hastily could easily plunge the economy back into recession. It is a question of timing and balance. And the Tories have yet to demonstrate that they understand this.

Mr Cameron has let some of his original modernising impulses fade too. There has been an impression of backsliding from the Conservative leader on the environment. One of Mr Cameron's priorities when he won the leadership in 2005 was reducing Britain's carbon emissions. But this did not even register in his recent list of 10 pledges for government.

Ambivalent over Europe

Former progressive messages on tackling entrenched social problems are in danger of being drowned out too. The Conservative home affairs spokesman, Chris Grayling, speaks of building more prisons and of more jail sentences. These are old Tory tunes – and, more to the point, discredited methods for dealing with crime and social breakdown.

But the biggest disappointment of Mr Cameron's leadership has been his stance on Europe. The European Union will be a crucial forum for managing some of the biggest challenges facing Britain over the coming century, from climate change and energy security, to defence and global trade. But the Conservative leadership remains deeply ambivalent towards the EU.

Mr Cameron has opposed the Lisbon Treaty and has promised a British referendum on it should the Tories come to office before it is ratified. But last week's Irish yes vote in a plebiscite on Lisbon makes it likely to be law by the time of the next election. Mr Cameron's position is that, in such circumstances, he would "not let the matter rest". While that might be a useful way of keeping his party united in the short term, he will not be able to duck this issue forever.

This muddle over Lisbon is symptomatic of a wider Conservative dysfunction when it comes to Europe. In order to win the support of hard-line Eurosceptic MPs in his 2005 leadership bid, Mr Cameron promised to pull Conservative MEPs out of the mainstream centre-right European People's Party grouping in the European Parliament. This pushed the Conservatives into bed with some unsavoury fringe parties from Central and Eastern Europe.

But more alarming than the Tories' new friends are the spurned old ones. The German Chancellor, Angela Merkel, and the French President, Nicolas Sarkozy, are both powerful leaders of centre-right governments. They should be natural allies for Mr Cameron. But both are baffled by this pattern of behaviour which serves to isolate the Conservatives in Europe. Parties might be able to get away with such posturing in opposition, but in government there is no hiding place. Britain needs a government prepared to work pragmatically with our European partners – not one driven by Eurosceptic ideology.

The opinion polls are encouraging for Mr Cameron – but not overwhelmingly so. The public still seem unsure over what the party stands for. This week's conference presents a chance for Mr Cameron to give them a better idea. If he is sensible he will use the opportunity to re-emphasise the centrist, pragmatic and thoughtful programme that he embraced four years ago when he set off on this journey.