David Cameron's aides are running around Birmingham in T-shirts with slogans such as “Big Government = Big problems”, “Social responsibility not state control” and “Bye Bye Bureaucracy”. The same messages are on Soviet-style propaganda posters plastered all over the conference centre as the Tories meet for their annual conference.

In fact, however, the Tory leader is rapidly repositioning his party over the role of the State, one of the few genuine dividing lines that remain in politics. It is a shift that risks infuriating his party's right wing, who have still not got over the refusal to promise tax cuts. Mr Cameron is willing to face them down. He knows he will never win an election if he does not put himself on the side of ordinary people rather than the super-rich.

The truth is that the banking collapse that yesterday claimed Bradford & Bingley as its latest victim is not just about money, it is also about power. The crisis in capitalism is simultaneously a crisis of government, a challenge to the way in which the free market has been run.

Last week Michael Douglas was accosted, angrily, about whether he still thought “greed is good”, the catchphrase of Gordon Gekko, a character he played almost 20 years ago. John McCain floundered when he suggested that the fundamentals of the US economy were sound. And the difficulty for the Conservatives is that for once Middle England agrees with the Labour Left that the State must step in to protect ordinary people from “spivs and speculators”.

At the start of this week the Tories were - despite their poll lead - oddly on the defensive because they seemed to be on the wrong side of this argument. It was not so much that Mr Cameron and George Osborne looked like “novices” on the global economic stage, more that they seemed to be taking a laissez faire approach at odds with the faites quelque chose mood. The promise to roll back the State in the “post-bureaucratic age” risked leaving voters with the feeling that Mr Cameron would let them sink or swim. The emphasis on “nudge” politics raised questions about what they would do when the City seemed to need a shove. Dave's “hello sky, hello trees” optimism felt misplaced as the economic storm clouds broke.

The Tory leader had somehow ended up giving the impression that the fat and the poor had responsibilities, but the rich had rights. Mr Osborne told Newsnight that “people making lots of money out of the misery of others” was a “function of the market”. And on Sunday Boris Johnson backed the “Masters of the Universe” in London, declaring: “You cannot regulate your way out of a recession.” It fitted with this narrative that the hedge fund manager “wolves” who had fuelled the crisis of confidence in the City were using their money to support the Conservative Party.

Now, though, Mr Cameron is changing direction. Yesterday, the Shadow Chancellor pointed the finger at the bankers, who have bought their houses near his home in Notting Hill with the bonuses they got in the good times. “The failures of the banking industry are the failings of the bankers,” he told the conference. “If you pay yourself sums far beyond what anyone else does in any other walk of life, then be prepared to lose it when you make mistakes.” Instead of calling for light-touch regulation, he made clear that state intervention was needed to prevent the City getting out of control. He boasted about his promise to clamp down on non-doms and said had been delighted to see short-selling temporarily banned. “Unlike new Labour we are not bedazzled by big money,” he said.

When Mr Cameron speaks tomorrow - from behind a podium (this will, according to his aides, be a “serious speech for serious times”) - he will make similar points. Boris's comments on the City were distinctly off-message. “There's been a shift in the national mood and we have responded,” one Shadow Cabinet minister says.

It's not the first time the Tory leader has thumbed his nose at business - early in his leadership he criticised WHSmith for selling Terry's Chocolate Oranges, for example. He also irritated some companies by calling for them to offer more family-friendly hours. His chief strategist, Steve Hilton, has long advocated greater corporate social responsibility - in Good Business he made the point that companies benefit from such altruism in the end. Indeed there has always been a strain of such thinking in the Tory party. One senior frontbencher recalls using the phrase “laissez faire” with Margaret Thatcher - she responded that he should never use those words again, and that the correct term was “ordered liberty”.

But there now seems to be a deliberate effort by Mr Cameron to redress the balance in his party against the free market and towards the fetters of the State. “Nobody expects us to be wholescale libertarians who advocate the legalisation of heroin and we need to redefine our economic liberalism too,” one senior Tory says.

Jesse Norman - whose book Compassionate Conservatism articulated the “new Tory” philosophy - has a new thesis called Compassionate Economics out next month. In it he argues that people feel trapped by a “culturally unsustainable corporate capitalism” that creates “clone towns”, fuels consumerism and equates money with success. Politicians of all parties have, he writes, been locked with disastrous effect into a neoclassical economics which assumes that everyone is driven by self-interest and nothing else. The Tories need to create a “new political economy” somewhere between Mrs Thatcher and Mr Brown. “The question isn't ‘What is the cure for capitalism?',” he concludes. “It's: ‘What kind of capitalism do we want?'.”

In politics, as well as in finance, the kaleidoscope has been shaken by recent events.

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