07/01/2013 17:18 GMT | Updated 09/03/2013 05:12 GMT

Cameron Needs to Deal With Ukip, but He Should Stick to the Modernising Project

Over the past few weeks, the Ukip juggernaut has carried on careering through British politics, with the party even rising to 16% in one recent poll. With a coalition government making the former party for protest voters - the Lib Dems - now the party against whom people want to protest, the next few years will undoubtedly be very significant for the very likeable and hugely personable Nigel Farage, and his cohort.

I don't believe for a second that Ukip will win 16% of the vote in the General Election, but the party has a very good shot of winning the European elections next year and significantly increasing on the 3% it achieved in 2010. Although some people who dislike Ed Miliband more than they distrust Cameron will take a tactical decision and plump for the Tories, others will vote for Ukip regardless of the fact that it will help to propel Labour back into power.

That is why I think it was, shall we say, pretty odd, for David Cameron to go on the offensive and describe Ukip as having some "pretty odd" members, to add to his previous suggestion that the party consisted of "fruitcakes, loonies and closet racists". Although there are plenty of odd Ukipers - and in many cases they're not just pretty odd, but completely dotty - this is true of the obsessives who are mainstays in every political party up and down the country. More to the point, though, a large number of people who would, for now at least, vote Ukip, but who might come back to the Conservatives, will not appreciate the two fingers that have been thrust in their direction.

I can understand why Cameron is in some ways reluctant to deal with Mr Farage. What the Ukip leader has been doing, very cleverly, is to move his party onto the ground left empty by the prime minister's push for the centre. On immigration, gay marriage and schooling, Farage is picking up where the Tories of the 1990s left off. Cameron is right not to be tempted into moving back to the right to placate the old-school Conservatives who want to stick to an agenda that saw the party suffer embarrassing defeats at successive general elections.

That does not mean, however, that Cameron should completely eschew the idea of dealing with the Ukip threat. Nigel Farage is not someone who will just disappear quietly into the background. Cameron should not forget the whole reason why Ukip exists in the first place: the EU. It is the Europe issue that acts as a lightning rod for its support, and which makes the party so appealing to many - not least, because it takes attention away from the social policies of yesteryear that Ukip has also adopted.

There is significant support for a referendum, and constitutionally it would seem equally justified as the vote on AV, and the upcoming poll on Scottish independence. As long as the Tories obfuscate on the issue, it makes the party appear weak. Cameron should offer a firm commitment for a referendum, but make clear that on other issues like gay marriage, the party has moved on. There is nothing inconsistent about combining forward-looking, liberal Conservatism with a referendum on the EU. In fact, the latter fits in well with the age-old liberal notion of self-determination.

Only this will take the wind out of Ukip's sails, but it will not derail the modernising project that Cameron has been so right to pursue. It will strip UKIP of its EU clothing, leaving a rather bare - and not that appealing - set of policies in its place. Dealing with Ukip by lurching back to the right will only serve to damage the Conservatives in the long term. Not only is moving on the EU, but nothing else, the right thing for Cameron to do, it is also the best way of ensuring that modern Conservatives remain in government after 2015. And for Mr Farage, I have a suspicion that he will be content with the victory of being the man who gave the British people the chance to choose whether they do in fact want to be part of the EU.