David Cameron will spell out his vision of "moral markets" today, as he enters the intense political debate over how to create a more "responsible capitalism".

In a long-awaited speech in London, the Prime Minister is expected to call for reforms to create a new "popular capitalism" and say the Government is prepared to intervene to make it happen. However, he is also likely to stress the benefits of free markets and to reject what he regards as the heavy-handed, statist approach favoured by Ed Miliband, the Labour leader.

Mr Cameron will enter the fray against an increasingly gloomy economic backdrop. As unemployment rose to a 17-year high, the Chancellor, George Osborne, admitted that official figures to be published next Wednesday could show that Britain slipped into negative growth in the final three months of last year.

The Prime Minister faces an uphill struggle in calming public anger over excessive pay for company bosses. Yesterday Goldman Sachs, the New York-based investment bank which employs 5,300 staff in the UK, announced a bill for pay and bonuses of £7.95bn last year despite a fall in profits. While the total pay packet fell by 21 per cent on the previous year, the share of revenues paid out in salaries and benefits rose from 39.3 to 42.4 per cent.

Ministers are braced for more damaging headlines next month when UK banks - including the state-owned Royal Bank of Scotland - release their figures. A public backlash is expected even though the total amount paid in bonuses is likely to be lower than in the previous year. "Every pound going on bonuses is another pound less to lend to small businesses," one government source said last night.

Mr Cameron is accused of failing to match his words with action. He and Mr Osborne have blocked a plan, favoured by Vince Cable, the Liberal Democrat Business Secretary, for workers to have a seat on remuneration committees - giving them a say on their bosses' pay.

Labour backs the proposal but it will not be included in sweeping boardroom reforms and measures to rein in excessive executive pay to be announced by Mr Cable next Tuesday. He is expected to call time on "rewards for failure" and the "old boy's network" operating on remuneration committees. Shareholder votes on directors' packages could be binding rather than advisory as at present, and companies forced to publish the ratio of senior directors' pay to the median in the firm.

Yesterday the four largest supermarket chains were accused of paying "poverty" wages to staff. A study by the Fair Pay Network (FPN) - a coalition of charities and NGOs including Oxfam, Child Poverty Action Group and the TUC - argued that despite huge profits and rising executive pay, the lowest paid workers at Tesco, Sainsbury's, Asda and Morrisons were not being paid a "living wage".

Mark Donne, a director of the FPN, said: "It cannot be acceptable to shareholders or customers of the big four supermarkets to see soaring profits, huge executive pay, incredible expansion, and yet a large strata of employees getting into greater debt, unable to buy new shoes for their children and relying on state benefits to survive. This report demonstrates the chronic unfairness and inequality within these retailing giants and the contradictory message of the Coalition Government, who in one breath say 'work must pay' and with the next act encourage greater recruitment by poverty-pay employers. This shameful, expensive, wasteful scandal must end."

Retailers defended their record, saying their employees also received performance-related bonuses and store discount cards on top of their basic salaries. Philip Clarke, Tesco's chief executive officer, receives a basic salary of £1.1m, less than the £1.4m paid to his predecessor, Sir Terry Leahy. However, Mr Clarke's pay could rise to £6.9m this year if he hits his targets. Justin King, Sainsbury's CEO, receives a £900,000 salary but his total package is estimated at around £3.2m; Dalton Phillips, CEO at Morrisons, receives a basic salary of £800,000 but could receive a total package estimated at £4m.

The report, Face the Difference, calculated that supermarket workers were paid an average of £6.83 an hour and only one in seven received a living wage rate - calculated at £8.30 an hour in London and £7.20 outside the capital. The minimum wage is £6.08 an hour.

On the eve of the 2010 general election, Mr Cameron called the living wage as "an idea whose time has come" but has not acted on it. Labour say Mr Miliband set the agenda on "responsible capitalism" in his Labour conference speech last September in which he urged the state to punish "predators" and reward "producers." Although derided by the Government at the time, it is now seen to have caught the public mood.

Cameron Reveals His Vision For 'Moral Markets'

meanwhile .....

Bankers at Goldman Sachs have been accused of living in a parallel universe after the Wall Street firm announced it had set aside £8bn to pay its staff in 2011 - an average of £238,000 each.

Against a highly charged political backdrop in which the government is pledging to tackle top pay, the potential payments sparked anger among unions and were used as fresh ammunition by campaigners calling for a tax on financial transactions.

A spokesman for the Robin Hood Tax campaign said: "When even in a bad year each Goldman employee pockets an average of $367,000 - nearly 10 times the average UK salary - it is proof that banks live in a parallel universe to the rest of us."

The TUC's general secretary, Brendan Barber, said: "Goldman Sachs are brazenly defying their own sliding profits by dishing out pay and top bonuses worth £240,000 a head. This latest example of excessive rewards for mediocrity should give the government the green light to get tough on top pay.

"Ministers should start by putting workers on remuneration committees and making pay and bonuses exceeding £260,000 liable for corporation tax."

Bankers at Goldman will learn in the coming days about the size their individual bonuses, which the firm insisted were lower than last year.

The potential scale of the pay deals was revealed as David Cameron prepared to join the growing debate on moral capitalism with a major speech in which he will argue that the Conservative agenda of markets, transparency and mutuality is well-placed to restore and reform a modern form of popular capitalism.

The speech, which will have echoes of his call for radical capitalism with a conscience at Davos in 2009, is intended to show that his politics and his party's history mean it is better equipped to address capitalism's amorality than socialism.

Among the ideas being set out by Cameron are ways to support co-operatives. In what is being described as "co-ops in a box", he will set out measures to make it easier legally to create co-operatives.

Cameron will say Conservatives instinctively abhor monopolies and protectionism, and regard transparency as the best antidote to bad company behaviour.

The prime minister is not expected to reveal an array of new policies, but is setting out his views before announcements next Tuesday by the business secretary, Vince Cable, on executive pay and proposals to address City short-termism.

Cable received a boost on Wednesday for his proposal to give shareholders more powers to throw out executive pay deals from City fund manager Fidelity, which endorsed his idea for a binding vote on remuneration reports.

The government's potential intervention on high pay comes as the US banks, all big employers in the City, are reporting their results for 2011, when the eurozone crisis dampened activity and hit profits.

Lloyd Blankfein, chairman and chief executive of Goldman Sachs, blamed "global macroeconomic concerns" for a 26% fall in a full-year revenues to $28.8bn - down 26% - and a near halving in earnings to $4.4bn.

Goldman used a greater proportion of its revenue (42%) to pay its 33,000 staff in 2011, even after cutting 7% of the workforce - 2,400 roles - during the year.

The total payout per staff member of $367,000 - a figure that includes salaries, bonuses, equity awards and benefits - was down 15% on the $430,000 paid the previous year. The actual amount set side to pay staff was down 21% at $12.2bn.

David Viniar, Goldman's finance director, maintained that "discretionary" bonuses were down "considerably more than revenues" during the year.

The company recently disclosed more about its pay deals in the UK as a result of rules set out by the Financial Services Authority requiring firms to publish pay for "code staff" - those taking or managing risk. Regulatory filings for Goldman Sachs Group Holdings (UK) show that it had 95 code staff in 2010 who had an average pay deal of $6.2m (£4m) in 2010 - and had a further $595m awarded in a one-off mid-year award of shares in 2010.

In his speech, Cameron will also argue that the triumph of the City under Labour was due to Tony Blair and Gordon Brown's determination to create a form of equality through tax credits funded by the excess profits of the City. He will argue for what he sees as a deeper form of social mobility and fairness created through a better educated and skilled workforce.

A key test for the speech will be whether he repeats his Davos attack on a "winner takes all culture" that ends up with the poorest half of the world's population owning less than 1% of the world's wealth.

Goldman Sachs Enters £8bn 'Parallel Pay Universe'