The controversy over Royal Bank of Scotland bonuses has highlighted that those bonuses only exist because the UK taxpayer owns most of the bank, is standing behind RBS so that it won't fail again, and has required the Bank of England to print money to make life easier. The taxpayer is also insuring £240bn of RBS's toxic assets via the Asset Protection Scheme, which sees the taxpayer's interest in RBS rise from 75% to 84%. The taxpayer is insuring the value of the securities which got RBS into a mess in the first place.
Here's a suggestion I heard - rather than pay bonuses based on current profits, which come from taxpayer support, why not pay bankers in the original toxic assets?
That way, some risks can be transferred from the people of Britain to a pool of people who ought to know all about risk. The toxic assets would have to be held for the long term - perhaps until they mature. The bankers could stand to make a great deal, which would be a reward for the risks. Or they may make little at all. But it would link bonuses with the risks the bank(s) took and the long term health of the financial system - not just that part of it supported today by taxpayers.