* Business Secretary says bank reform must be enacted
* Adds pressure on Bank of England to reopen QE programme
* Wants to curb escalation of executive pay (Updates after speech)
BIRMINGHAM, Sept 19 (Reuters) - A $2.3 billion rogue trading loss at Swiss bank UBS has reinforced the case for reform of Britain's banking system and plans to separate their retail and investment arms must be put in place, Business Secretary Vince Cable said on Monday.
"At present, banks are offered a one way bet. If they gamble and win - they fill up the bonus pool. But when they lose, the taxpayer pays," he told delegates at his Liberal Democrat party's conference in Birmingham, central England.
"If there were any doubts about the need for radical reform the UBS rogue trader has dispelled them," he added.
The Conservative-led coalition government, in which the Lib Dems are the junior partners, has said it will accept the recommendations of an Independent Banking Commission.
Cable, a former economist, has consistently called for robust action to control excesses in the banking sector.
"The Commission's key findings - to separate retail and casino banking - must be put in place. Legislation will start soon and be completed in this parliament," he said, indicating that the reforms would become law by 2015.
Raising pressure on the independent Bank of England to reopen its programme of quantitative easing to stimulate the economy, Cable said the economy faced an "immediate threat" of lack of demand, with consumers, companies and government cutting spending.
"A lot of responsibility rests on the Bank of England to relax monetary policy further linked to small business lending," he said.
Britain's first coalition government for 65 years says it will stick to its deficit-cutting austerity programme, resisting calls to relax the pace of spending cuts as the economy continues to stall.
Cable and other Liberal Democrat ministers have in recent days outlined ways to stimulate growth while keeping within their tight fiscal plan, including prioritising infrastructure projects and further QE to boost access to credit.
Cable trumpeted an announcement by luxury car maker Jaguar Land Rover that it was investing 355 million pounds in a new engine plant in central England, taking time out from the party conference to visit a Jaguar plant.
The government is providing 10 million pounds to back a project that will create 750 jobs.
Improvements in corporate governance would also help to bring more stability to the economy and ease anxiety over a growing pay divide, Cable said, outlining plans to give shareholders more power over the pay packages of top executives.
"I am ... consulting on how best to tackle the escalation of executive pay which, in many cases, has lost any connection with the value of shares, let alone average employee pay," he said.
"The public will only accept continuing austerity if it is seen to be fair," he added.
Pay at the top of Britain's biggest companies has soared in recent years while salaries for workers have failed to keep pace with inflation.
"The truth is that there are difficult times ahead, that Britain's post war pattern of ever rising living standards has been broken by the financial collapse," Cable said.