Whatever happened to compassionate Conservatism? Banished to the outer fringes of David Cameron's universe, to judge from the Tory conference in Manchester. "Hug a hoodie" and "vote blue, go green" are distant memories. Ukip's Nigel Farage and Cameron's Australian lobbyist and chief dog-whistler Lynton Crosby are driving the Tories ever further to the right.

Five more years of austerity in the cause of a budget surplus; another fuel tax freeze; a marriage tax allowance that benefits less than a third of married couples; more failed US-style workfare for the long-term jobless, undercutting the employed with pay rates of £2 an hour; abolition of the Human Rights Act; and deportation of foreign criminals without appeal.

It's a package as retro as the tweeds, Thatcher memorabilia and "Beware the socialist serpent" postcards on sale in the conference exhibition hall. But with Farage's nationalists ("Give us back our country," he bellowed to a packed town hall on Monday) threatening to overrun the Conservative heartlands in next year's European elections, the "modernisers" have been dumped or marginalised.

Instead, Owen Paterson, the environment secretary, has been hailing the "advantages" of climate change. Cameron has made his peace with his rightwing rival Boris Johnson, paving the way for the London mayor's return to parliament. There are even some on the Tory right who say privately that they would prefer another coalition with the Liberal Democrats to outright victory, for fear of an untrammelled rightward lurch.

That is of course the mirror image of what the Tories and their media allies accused Ed Miliband of doing last week when he unveiled plans to freeze energy bills and bring in new compulsory purchase powers for speculators who refuse to release land for housebuilding.

"Red Ed" hadn't just lurched left, it was claimed, and abandoned the "centre ground". He was "reviving 1970s socialism", unleashing "class warfare" and a "Stalinist land grab" worthy of the war against the kulaks, even "hurtling in the direction of Marxist Robert Mugabe". The energy monopolies howled that investment would collapse and the lights go out if they weren't allowed to charge whatever they wanted, even for 20 months.

In the real world, Miliband's programme has more in common with US anti-trust progressivism of the early 20th century than 1970s socialism. But it's a measure of how narrow the terms of political trade have become. If the reaction to a historically modest social democratic package is as extreme as this, what would it be to the more far-reaching policies needed to rebuild Britain's economy and public realm?

In the event, the attacks came unstuck. Polling showed Miliband's policies had popular support across the board. In fact, the majority of voters want to go further than Labour and renationalise the energy giants, along with rail and the Royal Mail. Most people thought the companies were bluffing about power cuts and investment.

So the political and media attack switched to Miliband's dangerous "populism". The air in Manchester is still thick with talk of Marxism, but the penny has dropped that policies which break, even gingerly, with the 30-year political consensus and challenge corporate greed and immunity may attract mass support. Both Cameron and his education secretary, Michael Gove, have started to backpedal on the energy price freeze.

It's likely to be a temporary reprieve. The repulsive attack by the Daily Mail in recent days on the Labour leader's father, the socialist academic Ralph Miliband, as a "man who hated Britain" and had an "evil" legacy – this from a paper that supported the Nazis in the 1930s, about a Jewish refugee who fought them in the British navy – is surely a taste of poison to come.

Cameron and George Osborne have already been panicked on to Labour's territory, rustling up a fuel tax freeze and bringing forward their own sub-prime mortgage subsidy scheme. But whatever the prime minister says in his conference speech about "capitalist excess", there will be no challenge to the corporate interests that are the Tory bedrock.

As the reality of his government's policies are played out in growing hunger among schoolchildren, spreading cuts and charges in the health service, payday loans and food banks, it's hard to see how the promise of 10 years of austerity will propel the Tories back to power, even sweetened by bank-share-funded tax cuts and a pre-election housing bubble.

But whoever wins the next general election, it's now clear it won't be from the fabled "centre ground". For three decades politicians and pundits have decreed that electoral success can only be achieved on the basis of an establishment corporate orthodoxy they decreed to be "the centre".

Public opinion has long been well to the left of it on privatisation, taxation and regulation, and arguably to the right of it on immigration. But the crisis has cut the ground from beneath it. Miliband may not have lurched left, but he's begun to break with that failed consensus. Cameron is heading rightwards. Nick Clegg claims to be in the centre, but in terms of public opinion he's nowhere near it. Whatever the politicians say, the stampede for the centre ground is over – which can only be a boon for democracy.

Twitter: @SeumasMilne