Every by-election is bad news for someone.

It is an unusual local affair, even in the douce country-urban suburbs of Hampshire, that turns out to be terrible, even shocking, for each of the parties with serious pretensions to govern Britain.

Set aside protest votes, scandals, "none of the above", and the odd, atavistic feelings that course through certain English veins at the mention of a place called Europe. Forget the fact that "historic" by-elections come and go, that sensational headlines fade. Eastleigh is going to alter British politics. For three contending Westminster factions, in whatever permutation, Eastleigh was a very bad night.

The Liberal Democrats won't hear the result described in that way, of course. A party that has grown accustomed to treating relief as the best emotion available seized instantly on a 14.48% drop in its vote since the General Election as a triumph. No sooner was the result announced than they were speeding away from the wreckage of Chris Huhne's career.

The line, polished and ready, was that they had survived the worst. Henceforward, it would be onwards and upwards. Their abysmal poll ratings, Nick Clegg's profound unpopularity, the leader's inept and shifty handling of the misconduct allegations against the party's former chief executive, Lord Rennard: suddenly, none of it mattered. Mr Clegg decreed that Eastleigh was a "stunning victory".

This was nonsense. The LibDems survived simply because the punishment they received was marginally less severe – though not in terms of actual percentage points – than the hiding handed out to the Tories. That party's vote was down by 13.96% on 2010 in a seat David Cameron knows he has to win if he is to have a hope of achieving a Commons majority. He picked a right-wing candidate who whistled all the right-wing tunes. No use.

Labour had no realistic chance of winning on what has long been contested ground between the LibDems and the Tories. Nevertheless, Ed Miliband's rebranded One Nation party should at least have been able to crash the Coalition party. Not a bit of it. Even with an affable, best-selling comic writer at their command in the shape of John O'Farrell, Labour's vote improved by a statistically derisory 0.22%. Whatever Mr Miliband is selling with One Nation, Middle England isn't buying.

Ukip came second and won. Even allowing for the effects of a by- election micro-climate, an increase in the share of its vote from 3.6% in 2010 to 27.8% represents a mighty upsurge. The anti-EU, anti-immigrant Poujadists – they would probably detest being associated with anything so French – now have a plausible chance in a few English seats. They have a better-than-plausible chance of shaping the future direction of the Conservatives and of future Westminster governments.

At Eastleigh, in a split-the-difference kind of way, Ukip enabled the LibDems to survive. In the process, the insurgent party became transformed, finally, into the stick with which Mr Cameron's backbenchers will now beat their leader. For them, the evidence is plain. To prosper in the places that matter to their version of Conservatism, the party has to be still more anti- European, more right-wing, "tougher" on immigrants, welfare and the poor. Only the English heartland counts.

Now the chance arises to discover whether Mr Cameron is – but no laughing at the back – a man of principle. Some in his party would like to cut a deal with Nigel Farage and Ukip. Some would like to hear the kind of rhetorical noise that would destroy the malcontents' appeal, much as Margaret Thatcher once undercut the National Front. Most are eager for a fight with "Europe". They believe, as though the 1980s had never ended, that in these steps begins the road to majority Government.

One problem is plain. They have a Chancellor who has spent most of his time in office acting as if nothing has changed since the Thatcher years. Even the loss of Britain's triple-A international credit rating, the rating by which he asked to be judged, has not persuaded George Osborne that Thatcherite sovereign remedies are quack medicine in the modern world. After Eastleigh, his budget later this month becomes crucial both for Mr Cameron and his enemies.

Mr Osborne can persist with austerity, or try to appease the Tories' core vote. He cannot, even by his own arithmetic, attempt to do both without casting aside any pretence of fairness in economic policy. He cannot pursue either ambition, by any sensible means, and still claim to be acting in the national interest. Throw some RBS shares at the voters? Skin the poor yet again? Conjure an excuse for some sort of tax cut? He could always admit he has been hopelessly wrong, but that wouldn't help his leader.

Whatever the choices announced by Mr Osborne on March 20, his party will continue to stampede rightwards. They tolerated Mr Cameron's detoxified brand and all they got was a dalliance with Mr Clegg and some damn-fool nonsense – as they would have it – about gay marriage. The Ukip eruption in Eastleigh leaves many of them wondering if they can save their seats. The rest of us are about to be governed according to that tawdry imperative.

The by-election also leaves Labour and the LibDems edging towards a shotgun betrothal. The former, apparently oblivious to the effect of such an arrangement on its voters beyond the English south, now has the measure of Mr Miliband's failure to – what shall we say? – improve. The latter, obliged to fight the Tories in places such as Eastleigh, obliged to "differentiate" itself from the Coalition partners in order to survive in 2015, has proof its local machines still function and no remaining alternatives. Mr Clegg's head will be a small price to pay.

None of this amounts to an attractive spectacle. If Britain's plight is as serious as all maintain, a weak Prime Minister is the last thing required. In such a situation, a weak opposition can only make matters worse. A Coalition supposedly formed in the national interest that cannot meanwhile keep its own show on the road is on a direct route to chaos. Whether the voters of Eastleigh yet realise it, a vote for Ukip addresses none of this. Immigration is not what ails Britain.

Watch, nevertheless, as each of three Westminster leaders commences the ritual of "listening", then of pandering. Watch as they begin to calibrate their rhetoric according to the arcane game of who-can-win-where. If the Coalition had achieved any of the things it promised to achieve, there would be no contest. If Labour had amounted to a plausible opposition, the increase in its share of the Eastleigh vote would have been less hilarious than 0.22%.

Instead, all dogs will wag because of the Ukip tail. A set of prejudices masquerading as a political party will shape Westminster's politics. That Mr Farage and his party have no traction in Scotland or in other parts of these islands will be forgotten, as ever, by those who dwell within the political bubble by the Thames. That could turn out to be their biggest mistake.

Eastleigh was not just another by-election. Its Ukip voters, 11,571 of them from a total of 79,000, could see no problem with Mr Farage's bill of sale. They liked what they saw. The rest of us are left to wonder what exactly we are seeing as it emerges, grumbling, from the English shires.