We have received a legal complaint from Philippa Stroud. She disputes the claims made in this article. We summarise her complaint at the foot of the article.

A high-flying prospective Conservative MP, credited with shaping many of the party's social policies, founded a church that tried to "cure" homosexuals by driving out their "demons" through prayer.

Philippa Stroud, who is likely to win the Sutton and Cheam seat on Thursday and is head of the Centre for Social Justice, the thinktank set up by the former Tory leader Iain Duncan Smith, has heavily influenced David Cameron's beliefs on subjects such as the family. A popular and energetic Tory, she is seen as one of the party's rising stars.

The CSJ reportedly claims to have formulated as many as 70 of the party's policies. Stroud has spoken of how her Christian faith has motivated her to help the poor and of her time spent working with the destitute in Hong Kong. On her return to Britain, in 1989, she founded a church and night shelter in Bedford, the King's Arms Project, that helped drug addicts and alcoholics. It also counselled gay, lesbian and transsexual people.

Abi, a teenage girl with transsexual issues, was sent to the church by her parents, who were evangelical Christians. "Convinced I was demonically possessed, my parents made the decision to move to Bedford, because of this woman [Stroud] who had come back from Hong Kong and had the power to set me free," Abi told the Observer.

"She wanted me to know all my thinking was wrong, I was wrong and the so-called demons inside me were wrong. The session ended with her and others praying over me, calling out the demons. She really believed things like homosexuality, transsexualism and addiction could be fixed just by prayer, all in the name of Jesus."

"T" said he moved to Bedford because he believed the church could help him stop having homosexual thoughts. "I was trying to convince myself that a change was possible but, at the same time, a part of me didn't believe it was possible," he said. "The church's approach was not that it was sinful to be homosexual but that it was sinful to act on it. The aim is to get a person to a position where they don't have these sinful emotions and thoughts."

"T" said it was only after he "took a break" from the church that his depression lifted. "It was the church's attitude towards my sexuality that was the issue," he recalled.

"My impression is that she genuinely cares about people," he said of Stroud. "Her personal beliefs may get in the way sometimes, but she is a positive person."

Stroud and her husband, David, a minister in the New Frontiers church, allied to the US evangelical movement, left the project in the late 1990s to establish another church in Birmingham. Angela Paterson, who was an administrator at the Bedford church, said: "With hindsight, the thing that freaks me out was everybody praying that a demon would be cast out of me because I was gay. Anything – drugs, alcohol or homosexuality, they thought you had a demon in you."

Kacey Jones, a hostel resident, said she was told to end her lesbian relationship or leave the church. "Philippa was still around when I first moved in," Jones said. "There was a 'discipleship house' for Christians struggling with issues, including their sexuality. They told me my feelings weren't normal. I didn't want to be gay, I wanted to be like everybody else, get married, have kids and please my parents."

Stroud wrote a book, God's Heart for the Poor, in which she explains how to deal with people showing signs of "demonic activity". Stroud, who declined to talk to the Observer, writes: "I'd say the bottom line is to remember your spiritual authority as a child of God. He is so much more powerful than anything else!"

In the book she discusses the daily struggle of running the hostel. "One girl lived in the hostel for some time, became a Christian, then choked to death on her own vomit after a drinking bout. Her life had changed to some extent, but we wondered whether God knew that she hadn't the will to stick with it and was calling her home."

One resident featured in the book, Mary, was in an abusive relationship. "We discovered further layers of the tangle when she admitted to previous lesbian relationships and to being on the receiving end of abuse from her family," Stroud writes, adding: "No wonder she was in such a mess!"

The Conservatives have tried to win over gay voters after a string of controversial comments by party members. The shadow home secretary, Chris Grayling, said owners of B&B accommodation should have the right to turn away gay couples. Julian Lewis, the shadow defence minister, said he was against lowering the age of consent from 18 to 16 for homosexuals.

Revelations about Stroud's past are likely to make the party's task even more difficult. "This reinforces our long-held suspicions that those out of sight, but with their hands on the levers of power, have deeply reactionary ambitions," said Keith Porteous Wood, executive director of the National Secular Society.

Ben Summerskill, chief executive of the Stonewall group, said: "If Mrs Stroud has been praying to rid Britain of its homosexuality, she clearly hasn't been praying hard enough. It would be highly regrettable if someone who continued to hold these views held any significant office in government."

• The article refers to "Abi" as a teenage girl. For the sake of clarity it should be noted that Abi is a transexual -someone who identifies with a physical sex that is different from their biological one

COMPLAINT FROM PHILIPPA STROUD

Since publication, we have received a legal complaint from Philippa Stroud. She disputes the testimonies contained in the article and states that she has helped individuals of all sexual orientations to deal with a multitude of problems such as drug addiction, self-harming, alcoholism, eating disorders, and sexual abuse through prayer as well as offering practical help and advice. She also says that she has never founded a church, let alone a church that tried to 'cure' homosexuals. She has never prayed or advised any person to change his or her sexuality and has never countenanced any person for whom she has had responsibility attempting to question any person's sexual orientation or to re-orient them. In addition, the reference to demonic activity in her book "God's help for the poor' does not relate to sexual orientation but to those who have been involved in occult practices, including violence and sexual abuse. She adds that the New Frontiers Church network is based in the UK and has over 600 branches worldwide of which 220 are in the UK and no more than 30 are in the USA. It is not part of the US Evangelical Movement.