Video: Vince Cable attacks City 'spivs' who gambled away the economy

In a speech decried as "rabble-rousing" by business leaders, Mr Cable condemned the "outrageous" scale of bank bonuses after the credit crunch.

He also deployed combative party-political rhetoric to reassure activists' misgivings over the coalition deal - counterbalancing leader Nick Clegg's softer tone on Monday.

While admitting it was "not much fun" being in bed with the Conservatives, Mr Cable insisted it was "necessary for our country that our parties work together at a time of financial crisis".

He said the Lib Dems were "punching above our weight" in the coalition, stressing that the Tories had been forced to accept changes to income tax and capital gains as well as dropping key policies such as cutting inheritance tax.

"Ironically, we may be able to make more progress on a fairness agenda with the Conservatives than New Labour was willing to do," he said.

Giving Lib Dem activists a green light to criticise coalition policy, Mr Cable urged them to "keep us honest".

He suggested the party had not given up hope of further tax reforms, saying he "personally regretted" that plans for a mansion tax on homes worth more than 2 million had been dropped for the coalition agreement.

With Lord Browne's review of higher education funding due next month, Mr Cable acknowledged that many activists believed university education should be free.

But he insisted: "In reality, the only way to maintain high quality higher education with less government money is for the graduate beneficiaries to make a bigger contribution from the early extra earnings they enjoy later in life."

Mr Cable was forced to deny he was "Marxist" last night after business leaders criticised pre-released extracts from his speech which lambasted capitalist excess.

But the final version of the address - which was run past Downing Street before being delivered today - retained the most controversial passages in which he described markets as "often irrational or rigged".

Having jokingly referred to party members as "comrades", he announced a wide-ranging review into the "murky world of corporate behaviour", including takeovers and over-generous incentives for executives.

"Capitalism takes no prisoners and kills competition where it can, as Adam Smith explained over 200 years ago... Competition is central to my pro-market pro-business agenda."

He delivered a harsh assessment of the City's behaviour leading up to the financial crisis saying he shared public fury.

"On banks, I make no apology for attacking spivs and gamblers who did more harm to the British economy than Bob Crow could achieve in his wildest Trotskyite fantasies, while paying themselves outrageous bonuses underwritten by the taxpayer," he said, while stressing that his goal was to ensure banks provided capital for small businesses rather than "seeking retribution".

CBI Director-General Richard Lambert said it was "odd" that Mr Cable thought it was "sensible to use such emotional language".

"Mr Cable has harsh things to say about the capitalist system: it will be interesting to hear his ideas for an alternative," Mr Lambert added.

Former trade minister in the last government and ex-CBI chief Lord Digby Jones accused Mr Cable of behaving like a "Liberal rabble-rouser" rather than a Business Secretary.

The Adam Smith Institute thinktank said the Cabinet minister had misrepresented the economist, with director Eamonn Butler insisting: "It is not capitalism that kills competition. It is regulation, and regulated capitalism."

And RMT general secretary Mr Crow said he had been singled out for a personal jibe because his union would be "the main point of resistance to his Government's savage assault on jobs, living standards and public services".

However, Lib Dem leader Nick Clegg dismissed the reaction to Mr Cable's speech as a "storm in a teacup".

"The point Vince is making - which is a totally legitimate one - is that he, as a free market liberal, believes that you have got to look after the small guys as well as the big guys," Mr Clegg told reporters in New York, where he is attending a United Nations summit.

"You can't allow big players on the block, whether it's legal or financial or any other, to crush competition under foot."

Turning to the delicate topic of public spending cuts, Mr Cable conceded that they were "bound to hurt" because "strong disinfectant stings".

But he laid the blame for the situation firmly on the previous government, which left the UK "exceptionally vulnerable and damaged".

Labour had now taken the "easy option of deficit denial", and were "ranting with synthetic rage", Mr Cable said.

Meanwhile, armed forces minister Nick Harvey sparked a furore by suggesting that it was purely a "political" matter whether a final decision on Trident was delayed until after the general election in 2015.

The Lib Dem MP told the conference that putting the crucial issue off would be "of no great financial significance, it is of no great military significance, it is of no great industrial significance".

"But believe me, it is of profound political significance," he added.

However, speaking from New York, Mr Clegg quickly dismissed the idea, saying the timing and other issues were part of a "perfectly sincere, level-headed debate".

"This should not be determined by party politics, and indeed it is not," he added.

Lib Dem activists endorsed a motion calling for the Government's Strategic Defence and Security Review to consider alternatives to a like-for-like Trident replacement.