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David Cameron has urged Welsh Conservatives to fight a "battle of ideas" on the deficit, welfare and the economy.

In a rallying cry to a conference in Swansea, the prime minister said Wales and the UK were in a "global race".

Britain faced tests that would decide whether it would be "a success story or an also ran".

Attacking the Welsh government, Mr Cameron said: "The only people who don't get it is Labour in Cardiff Bay."

He said the devolved administration was "determined to drag Wales down".

It had created an education system that "holds young people back" and "endless regulation that's holding business back".

"But while they're messing it up, we're sorting it out," he said.

Mr Cameron pointed to the planned electrification of the railways in south Wales, cuts to income tax and a commitment to upgrade the M4 motorway.

Reflecting on the death of Baroness Thatcher, he said her greatest lesson was that "you can't just take a decision and think 'that's it, job done'.

"You've got to marshal your arguments, make them with great force, and realise the job isn't done unless you win the greatest battle of them all - the battle of ideas."

Listing three "big arguments" that the Tories had to confront, the prime minister said it was not true that "you can spend your way out of debt".

Secondly, Conservatives had to take on opponents who say UK government welfare changes "are unnecessary and unfair".

And Tories had to "stand up for enterprise", he said, insisting that the UK "works best when we're connected in the world".

"When people say 'pull up the drawbridge, Britain can make it on our own', they're wrong," he said.

With two years until the next general election in 2015, Mr Cameron sought to draw battle lines between his party and Labour.

He attacked Labour leader Ed Miliband and shadow chancellor Ed Balls as the two politicians who "racked up the debts, saw the banks go bust and spent the money we didn't have".

He said that "come the next election I am going to look the British people in the eye and deliver this simple message... they [Miliband and Balls] have given no apology for what they did".

"They have no plan to get out of it, and they have no idea how to fix it - apart from making it worse by borrowing more money."

Mr Cameron restated the case in favour of benefit reform as the UK government prepares to launch the first trial of the universal credit - a new system for making welfare payments - on Monday.

Political opponents have attacked the changes, but Mr Cameron said: "Welfare today is completely unaffordable."

On "the battle for enterprise" he attacked "greens who say we can't build any new roads" and those who say "no to anything new: no to shale gas, no to nuclear, not to science".

He added: "It's about winning the battle of ideas, but not for political points - it's for people."

When he addressed the conference, Justice Secretary Chris Grayling was heckled about changes to legal aid by members of the Criminal Bar Association, including barrister Andrew Taylor, a former Tory candidate.

Mr Grayling was applauded by the audience when he said the reforms were part of attempts to rein in public spending and reduce the deficit.