UK's Cameron woos voters with Thatcherite dream of home-owning democracy

* UK faces close election on May 7

* PM Cameron launches policy manifesto

* Holds out prospect of 'good life'

* Pledges to extend right-to-buy housing scheme (Recasts, updates after manifesto launch, Cameron speech)

By Kylie MacLellan and Andrew Osborn

SWINDON/LONDON, April 14 (Reuters) - British Prime Minister David Cameron launched his party's pre-election policy manifesto on Tuesday, promising to deliver the "Conservative dream" of a home-owning democracy, where over 1 million more families could buy their homes cheaply.

With just three weeks before what is shaping up to be Britain's closest election since the 1970s, Cameron chose to largely abandon negative campaigning amid criticism the strategy was backfiring and focused on what he could offer voters.

He made no mention of his rival, opposition Labour Party leader Ed Miliband, and did not repeat a robust personal attack on his opponent's character made last week by Michael Fallon, his defence minister.

Instead, he held out the prospect of higher living standards after five years of austerity.

"The dream of a property-owning democracy is alive and we will help you fulfil it," Cameron told supporters at a technical college in the western English town of Swindon.

"We offer a good life for those willing to try because we're the party of working people," he said.

The election is about more than simply who will govern the $2.8 trillion economy: Cameron has promised a referendum on European Union membership while Scottish nationalists, who want Scotland's independence, are seeking a kingmaker role.

Cameron hopes to parlay his economic record into victory.

If re-elected on May 7, he said his party would extend a "right-to-buy" scheme, first introduced by former Conservative leader Margaret Thatcher, to allow people living in social housing to purchase their homes at a discount.

The scheme, first launched in 1980, helped Thatcher win three elections. Cameron hopes his expansion of the programme - to include social housing owned by non-profit organisations - will allow him to broaden the economic message of his campaign.

Under the expanded right-to-buy scheme, 1.3 million families living in non-profit housing associations would be granted the right to buy their properties at a heavy discount. For each home sold, a new one would have to be built.

Designed to court working class voters who have abandoned his party for the anti-EU UK Independence party (UKIP) and wavering Labour supporters, his pledge is also an attempt to break deadlocked opinion polls.

Speaking in front of a giant British flag and the slogan "A brighter, more secure future", Cameron told the audience, which included his wife Samantha, that voters had to stick with him if they wanted continued economic security and strong leadership.

Echoing Thatcher again, he said Britain didn't have to be "a steadily declining once-great nation" but could revert to being a small island "with a massive impact."

He also promised to double the amount of free childcare and to legislate to ensure that nobody working 30 hours a week on the minimum wage pays any income tax.

Labour often charge that Cameron's privileged background means he is out of touch. Going after working class votes is a way of countering that.

Cameron's gambit follows the Labour manifesto launch on Monday in which Miliband tried to overturn a damaging perception his party could not be trusted on the economy. (Editing by Stephen Addison)