Question: At the recent Labour Party conference Tony Blair argued that the Conservatives blame regular election defeats on the basis that the constituency they are contesting isn't natural Conservative territory. He describes how you have used this excuse for failures in Scotland, Wales, big cities and even places like Hastings. How do you counter this criticism?

Theresa May: I'm not as convinced as Tony Blair that we've used that phrase in consistent by-election defeats. Certainly it was a phrase I used in Brent East when we were talking about the result there and I think it was a fair reflection of that particular constituency and that particular electorate.

Question: Wouldn't his argument be that the Lib Dems could quite easily have said that Brent East isn't their natural territory as they came third in the last General Election but then they went on to win this by-election?

Theresa May: What happened in Brent East is that the Labour voters who were disillusioned with the Labour Party, fed up with their failure to deliver, fed up with their failure to improve public services, looked around as Professor Anthony King put it, for a Labour-like party and found a home with the Liberal Democrats who positioned themselves to take on that vote.

You asked me before about what is natural Conservative territory. The answer to that is that no party can or should identify any area of the country as a natural area for it. What I think is important is that we've got a message we get across to people and a message that will resonate with people across the country because it related to the issues they are facing on a day to day basis.

Question: At your last party conference you described how the Conservatives had been, in your words, 'unchanged, unrepentant and just plain unattractive'. How has the party changed since then?

Theresa May: I think one of the key things that has changed and which started before the last conference, is that we are focusing on the issues that really matter to people, and that's predominantly focusing on issues relating to public services. So we are looking at the real problems people are facing and the need for a party that wants to be in government and wants to say to people we are a credible alternative government and to produce the solutions to people's problems rather than get tied up with issues that are of less relevance to people.

Question: Labour bait you on public services by saying 'we are going to pump billions more into the public services' - are you?

Theresa May: When Labour just talks about how much money they are going to put into public services it just shows how out of touch and old fashioned they are because they are looking at yesterday's argument.

The argument traditionally has been either you are in favour of high spending and high taxes or you are in favour of low taxes and therefore lower spending and, so the argument goes, therefore less quality public services. That is yesterday's argument.

The challenge today is to show that we can produce both prosperity and better public services, we can have a low tax environment and produce the quality in our public services that people want and deserve.

We are standing back, looking to see what other people have done, what we can learn from them and bring those lessons over here to the UK and show how we can provide both that low tax environment that ensures economic vitality and prosperity and at the same time those quality public services. A lot of it with Labour is that they think it's just about how much you spend. Actually it is about how you spend the money.Question: So you won't match them on spending?

Theresa May: We will show what our spending intentions are closer to that time. The process that we've followed is a very simple one.

We are saying let's see what we need to do, then look at how much it will cost and then look at how you fund it.

Question: Do you think people still call the Conservative Party the 'nasty party'?

Theresa May: I think people now see a Conservative party that is reflecting their interests and what they are interested in, particularly with regard to public services. And I hope they see a Conservative Party that is showing in its action and policies that it is interested in delivering for people. And in delivering what people are predominantly crying out for which is a fair deal.

Question: Lord Bell described how your 'nasty party' description of the Conservative party was actually damaging to the party - how would you respond to that?

Theresa May: I don't think it was damaging to the party. The overwhelming phrase that people used to me after I had made that speech was "it had to be said". What I said to the party was that this was a perception of the party and that people in the hall felt let down because they knew it was an unfair description but it was a perception that had built up. I don't think my description was damaging, a lot of people said it had to be said and felt that it was now possible for the party to move on.

Question: A catalyst?

Theresa May: In a sense, yes.

Question: You talk about how the Conservative party has moved on and has become more reflective of people's interests, but are the MPs and councillors reflective of the make-up of the country - do the public see more women and ethnic minority Conservative representatives?

Theresa May: I think the public are seeing a more representative cross-section of people. We have seen progress in the selection of women and ethnic minorities candidates.

I think a very powerful reflection of how the party has changed is that in Wolverhampton South West, Enoch Powell's old seat, they have selected an Asian women to fight it. So the Conservative Party has said what's right for today, who's the best candidate and the significance of that being in Enoch Powell's old seat is very great.

Question: So progress in getting more women and ethnic minority candidates but are you happy with the pace of that progress?

Theresa May: There is more for us to do and that's why we are constantly on the case. We've offered associations a variety of ways of selecting, we've opened up the process they can use. We've even offered them a primary selection process, based on the sort of primaries you see in the US. We are always looking at new ideas and new ways of doing things to get a better representation of the candidates that are needed in today's world.

Question: In an interview earlier this year, you said the public aren't at the stage yet where they are saying, 'we are disillusioned with Labour and we are going to vote Conservative'. Have they got to that stage yet?

Theresa May: I think it has moved on. I think the political environment has changed significantly in the last few months. I think we saw a sign of that in May when we won those council elections, when we came out with 500 extra councillors.

We won in that one night, control of more councils than the Liberal Democrats control nationally. So we had very good local election results.

People have moved on now. They are disillusioned with Labour, they are fed up with the government's failure to deliver, they think Labour isn't working, they can't believe a word they say anymore. We have now earned the right to be heard.

What we are now doing and conference will be an important part of this is to show the sort of government we would be. What we would be doing as Conservatives, what we know works and will deliver for people.

Question: So what will be the key themes from the Conservative conference this week?

Theresa May: We are going to be showing how we can deliver a fair deal for everyone. People keep coming back to me and saying "Government just isn't giving me a fair deal. They are failing to deliver."

Key themes from the conference will be about freedom and giving people more choice.

Question: In his conference speech Tony Blair talked about New Labour's success at occupying the centre ground. We have New Deal from Labour, Fair Deal from the Conservatives. You're both jostling for the centre ground where can people identify the real differences between you and New Labour - where's the clear blue water?

Theresa May: There is a very clear difference between the parties. Labour say "Trust us, we know what to do." We say, "We trust you. We trust people to make decisions for themselves." And that's a very real difference.

Labour has been a centralising government, a regulating government, it has introduced so many targets. It has a 'Whitehall knows best' mentality. As a result this is why so many things are going wrong with public services. We see behaviour distorted by the target setting.

For instance, there have been reports of how ambulances were queuing up outside a hospital because the hospital had to meet a target to reduce the time people spent waiting on trolleys and if they took them out of the ambulances they triggered their waiting time on a trolley, so to meet their target they kept them in the ambulances instead, which meant the ambulances weren't available to go elsewhere and it affected the ambulance trust because they had a target for getting to places within a set time of being called. So you get a mentality where people's behaviour is driven by the need to meet government targets not by what matters for the patient.

Question: A number of commentators say that people have become disillusioned with the government but there not at that stage where they are listening favourably to Conservative policies - what can you do to make that next step?

Theresa May: We're at the point where we've earned the right to be heard and now we do have to show people we are that credible alternative government. Governments lose elections but oppositions only win them if they are a credible alternative. We are getting the first bit in that people are becoming fed up with Labour, we've got to show we are a credible alternative. I'm sure as we come out of party conference people will see the clear difference- they will see Labour isn't working and they will see that the Conservative way of giving people freedom works.

Question: A credible alternative has got to be a disciplined unit - so what's your message to Conservative MPs?

Theresa May: Divided parties don't win elections.