'Do I think I'm nice? Of course I do!'

In January the 46-year-old MP, whose brief takes in crime-fighting, hit the headlines by falling victim to one of the oldest tricks in the burglary book. A man came to the door of Letwin's home in Kennington, south London, claimed his car had broken down, asked to use the toilet and promptly made off with the MP's wife's jewellery, an electronic organiser and a mobile phone. "The man said he was desperate to use the toilet and I am the sort of person, I suppose, who lets people use the toilet when they say they are desperate to use one," Letwin said at the time.

He says now that there was a serious point behind that comment. "It was about neighbourliness and wanting to live in a certain sort of society." Although he says he would not be as generous with his London lavatory these days, he adds that the sense of community is different in an area like his constituency: "If you're passing through West Dorset and you come to my house, or the house of any of my neighbours, and you said you wanted a glass of water or to go to the loo then, yes. Of course, if you were some big hairy individual with a very big stick and a sub-machine gun, then no …"

Sinking back into the armchair in his House of Commons office, Letwin smiles and lets rip a huge, hearty guffaw. His laugh sounds very much like those produced by the laughing policeman slot machines found on the end of piers at seaside resorts, and the force of it takes some getting used to.

Letwin is generally regarded by his peers as a genial, affable man. According to one member of his staff: "He's a joy to work for, very easygoing, very chatty." In fact, Letwin's popularity with other Tories is such that he emerged untarnished after a gaffe during the general election campaign in 2001 when he said the Conservatives would be able to cut taxes by £20bn, rather than the official figure of £8bn.

Although the former Cambridge don doesn't initally come across as a hard-hitter, he does have an uncanny ability of laughing – and making jokes at his own expense – with great gusto one minute, but appearing measured and displaying a good deal of gravitas the next.

On the subject of asylum seekers, for example, Letwin becomes serious. He strongly believes that any problems stem from the fact that the system is "overloaded and fantastically lethargic". The MP's answer is for the government to ditch its plans for large accommodation centres in favour of smaller units. "The way to resolve the administration is to have small centres with lawyers, doctors and decision makers all in one place. Then there would be a vast chance of speeding the process up." He is also in favour of a bilateral agreement with France which would mean the UK and France sharing out the numbers of people seeking asylum.

Turning to the subject of last week's comprehensive spending review, Letwin says that there is little sign of a fundamental reform of public services. This, he believes, is down to Labour's love of bureaucracy – and Letwin hates bureaucracy. "The government came to power in 1997, believing that if they engaged in more effective bureaucratic monitoring then there would be huge improvement in public services without spending any more money." Letwin believes that without a "completely liberal attitude" to public services, very little will be achieved. "Increased state intervention is squeezing the life out of professional initiative. The whole direction is wrong – we need to localise services."

Localisation and decentralisation are two words that dominate the Letwin lexicon. In July, at right-wing think the Adam Smith Institute, the MP made a speech which was widely regarded as emphasising his party's drive to be seen as more compassionate. Letwin declared that the Conservatives believe the government's main role is to "support the institutions of society and the complex, infinitely varied relationships between those institutions". Some people might accuse Letwin of suffering from political amnesia here, because his mantra is at odds with Baroness Thatcher's infamous 1988 speech in which she declared there was no such thing as society. Letwin says she was misquoted.

Britain's poorest estates are, Letwin thinks, a result of too much centralisation. Letwin said in his Adam Smith speech: "The weakness of societal links and the retreat of a police presence has left them vulnerable to malign and oppressive gang cultures."

We need to take power back from the vast bureaucracies and hand it back to the professionals and the community

Elaborating on this theme, Letwin adds: "We need to take power back from vast bureaucracies and hand it back to the professionals and the people that they're dealing on behalf of in the community."

He believes that the localisation of public services is key to neighbourhood renewal and he is a fan of the community warden system.

The MP is unimpressed by the money promised in last week's comprehensive spending review. He argues that no huge "dollop" of cash should be thrown at public services without a sweeping reform of the way the sector works. Building trust in the community and handing back power to it, he explains, is key to revitalising many sink estates: "Instead of some man from Whitehall telling you what to do, there should be some system which means that professionals get on with the job but are accountable to the community. The police should be more accountable to the local community and that is a question of thinking through the local relationships that the police have – with social services, with magistrates, with probation services and housing."

This all sounds very laudable, but leaves the Conservative Party open to accusations of being all mouth and no trousers because, as Letwin admits, while he and the party have "established the general desire" to champion decentralisation, there is more work to be done on how actually to carry this out. And, of course, until Letwin and his colleagues figure out how to put their well-meaning policies into practice, those on the front line – housing officers, community wardens and the like – will have to wait for the creation of this more neighbourly society.

With his liberal views, it is little wonder that Letwin is often presented to the media and the public as the acceptable face of Conservatism. He even jokes about his tag as the party's "Hampstead liberal". But he does agree that he has a liberal approach to policies. The MP, who went into politics because he thought "helping Keith Joseph in the education department sounded like fun" (see factfile, below), was nicknamed "Nice Tory" by The Guardian newspaper. He has been trying to conceal the label from his frontbench colleagues, he jokes. But is that label accurate? He laughs again. "Do I think I'm nice? Of course I do!"

But, as if to remind us all that beneath the informal, liberal exterior, he means business, as Housing Today went to press Letwin was about to announce hardline proposals for zero tolerance on cannabis users and enforced treatment for all drug users. Another contrast to add to his image.

Letwin maintains that the Conservative Party has "an extraordinarily long tradition of liberal ideas. I'm delighted [the press or public] think I'm nice, but all I'm doing is explaining the heart of what we're about.

"The Conservative party is about a belief in society, in a nation, in things other than the state. The state is a servant of society and the nation, not the master of them. Because the newspapers start with this entirely erroneous supposition that Tories believe in some ghastly series of propositions, when they find someone is explaining otherwise, I benefit spuriously," he says, before half-joking that the Magna Carta – which championed freedom and the notion that no man is above the law – was "fundamentally a Tory idea".