By Hannah Goff
BBC News Online Politics Staff in Bournemouth
The Liberal Democrats were warned against lurching to the right as they debated the policies they will campaign on at the general election.
Mr McCarthy argued against following New Labour to the right
"We don't need three right-wing parties in Britain," Donnachadh McCarthy of the Camberwell and Peckham party said during a manifesto debate.
An amendment restating the party's commitment to a free and publicly funded NHS was passed unanimously.
It follows calls from some senior party members for the NHS to be disbanded.
In an essay in the Orange Book on Liberal thinking, Treasury spokesman David Laws urged the party to consider bringing in a private health insurance scheme to help fund the NHS.
This and other essays in the book have provoked an internal debate on which way the Lib Dems are heading, although many have dismissed the arguments as an attempt to court Tory voters.
Mr McCarthy told delegates at the party's conference in Bournemouth: "We don't need to follow New Labour to the right... We remain at the progressive centre left."
"Pure markets don't provide decent housing, working conditions or health care for the poor," he added.
Former health spokesman Evan Harris also backed the amendment saying he was disappointed the commitment to abolish charges for dental and eye check-ups, for example, had not been included in the pre-manifesto.
Mr Kennedy opened the conference by condemning the Iraq war
But delegates backed the party's pre-manifesto, which includes plans to end all university fees and bring in free personal care of the elderly, adopting it as policy.
A new 50% tax rate for all earnings above £100,000 a year would help fund the policies.
It was the first chance the wider party has had to debate the full package the leadership wants to campaign on when they face the electorate.
Delegates also heard plans for "green incentives" to cut pollution.
Speaking on the BBC's Breakfast, Mr Kennedy claimed the party had both Labour and the Conservatives rattled, following attacks in the left and right-wing press.
"The Liberal Democrats are something different, the party of the future. We are going places and that is why we are under attack, but we are up for it," he said.
Lib Dem campaigns chief Lord Razzall predicted his party would form the next non-Labour government, adding: "The Tories are finished."
The Lib Dems insist their plans are fully costed but Labour Chief Secretary to the Treasury Paul Boateng said their figures did not add up.
"The Lib Dem draft manifesto adds significant further costs to the 100 separate spending commitments they've made over the last two years," said Mr Boateng.
The conference in Bournemouth also debated the future of Iraq and a motion calling for the coalition to account fully for the expenditures of the Iraq development fund and cash gained from Iraq's oil revenues.
The party has also been debating its education policy, which not only includes scrapping tuition and top-up fees for universities but calls for increased vocational opportunities for youngsters aged over 14.
Education spokesman Phil Willis promised to limit class sizes to 20 for five to seven-year-olds and 25 for eight to 10-year-olds.
The government's limit of 30 per class did not go far enough, he said.
Delegates also heard calls from transport spokesman John Thurso for a high-speed rail link between Edinburgh and London.
The Lib Dems say work on the link, which would cost up to £12bn and take pressure off the existing network, could begin in 2013 and be completed 10 years later.