Cable set to 'shine harsh light' on corporate behaviour

He will pledge to "shine a harsh light into the murky world of corporate behaviour" as he announces a major and wide-ranging study.

Mr Cable is keen to tighten regulations on takeovers after the outcry over Kraft's purchase of Cadbury, while Lib Dem activists are keen for action to tackle fat cat pay.

In his keynote conference speech, Mr Cable will condemn markets as "often irrational or rigged" and will also insist that unrestrained capitalism "kills competition".

He will hope the tough comments reassure Lib Dem activists who have been questioning the compromises leader Nick Clegg made in order to forge the coalition with David Cameron. Mr Clegg sought to ease those concerns on Monday as he urged party members to "stick with us".

But the speech could also make life difficult for Mr Cameron, as Conservative traditionalists are concerned they are being dragged to the Left on issues such as replacing Trident.

As the Lib Dem conference in Liverpool draws to a close, Mr Cable will use his speech to announce a consultation starting next month to cover issues surrounding takeovers, executive pay and corporate short-termism.

"The principle of responsible ownership should apply across the business world," he will tell party members. "Let me be quite clear. The Government's agenda, is not one of laissez-faire. Markets are often irrational or rigged. So I am shining a harsh light into the murky world of corporate behaviour."

He will add: "Why should good companies be destroyed by short-term investors looking for a speculative killing, while their accomplices in the City make fat fees?

"Why do directors forget their wider duties when a fat cheque is waved before them? Capitalism takes no prisoners and kills competition where it can."

Aides said Mr Cable was determined to give shareholders more control of how takeovers were conducted, and how executive pay was set.

Mr Clegg has already delivered a stark warning to City bankers that Ministers will not stand "idly by" why they pay themselves huge bonuses.

He suggested new taxes could be imposed to recoup some of the billions of pounds pumped in by the Government to bail out the financial sector, saying: "If you abuse the generosity of taxpayers who have provided, both directly and indirectly, a massive infusion of public funds to bail you out by awarding yourselves bonuses that will appear almost gratuitously offensive at a time when people are having sacrifices in terms of their pay and pensions, then clearly this Government will not be able to stand idly by."

Mr Cable will also concede that deep cuts to public spending are "bound to hurt", saying "strong disinfectant stings".

But he is to lay the blame for the situation firmly on the previous Government, which left the UK "exceptionally vulnerable and damaged".