Tom Richmond: Yes, the bankers deserve a bashing, but what about posturing politicians?

His face may not be instantly recognisable to the masses – unlike an errant senior politician – but the row over the former Easingwold School pupil’s £963,000 share bonus illustrates all that it is wrong with banking.

Hester earns £1.2m a year. Nice work if you can get it. His bank is effectively state-owned, with the taxpayer holding a 84 per cent stake. Its share price has fallen markedly. Up to 30,000 staff have lost their jobs and lending targets have not been met.

It gets worse. Viable companies have gone to the wall because of intransigence on the part of the RBS after borrowing rules were tightened following the public bail-out.

Some close acquaintances had run a haulage business for the best part of 40 years. It was a sound business – until their main contractor announced, without warning, that it would delay the payment of future bills from a month to 90 days. With margins tight due to soaring fuel prices, and despite the guarantee of future payments, they needed their overdraft extended so they could pay their 20 staff in the interim. The RBS refused and the firm eventually went under last summer.

Given this, Hester could – and should – have avoided the opprobrium that has come his way if he had rejected his bonus when it was first proposed by his directors. It would have signalled that he understood the discord between the public and the financial sector – after all he has previously said that his own parents believe bank bosses are paid too much.

If he had put the shares in a fund that could be used to generate funds to help young entrepreneurs set up their own firms, he would not be public enemy number one today. That said, many attribute the RBS’s performance in the past year to the eurozone crisis, rather than poor management. And, in this regard, the quietly determined 51-year-old is victim of political opportunism and incompetence – by both the past and present governments.

Why? Hester was persuaded to leave British Land in November 2008 to replace the disgraced Sir Fred Goodwin as RBS chief executive. He was the best man for the job, said the then Chancellor Alistair Darling, and saved the bank from an even greater financial calamity.

High praise indeed. Darling also conceded in his memoir that any salary, however meritorious, would be viewed as obscene – and that Gordon Brown’s government paid insufficient attention to recurring issues like bonuses and banks lending more money to small businesses. As such, this makes a mockery of Labour leader Ed Miliband’s repeated calls for the bonus to be scrapped, including the threat of a Commons debate that finally forced Hester to waive his shares on Sunday night. Why didn’t Miliband, one of Brown’s key lieutenants and whose administration knighted Goodwin, speak out when the contract was being signed off? And, if Hester quit now, how would an Employment Tribunal view any constructive dismissal case that he might lodge in the future?

That said, David Cameron has not fared any better. He did have a get-out clause open to him – the small-print says a bonus can be “discretionary” – and the PM could have exercised this right on behalf of all taxpayers. Instead, he said, lamely, that it was a matter for Hester.

Furthermore, the Treasury asked the RBS to bring forward the Hester bonus payout so it could send out a strong message to other banks preparing to reveal their results that executive pay must be kept in check – a tactic that has backfired spectacularly.

Cameron’s mixed messages also undermine the crackdown on corporate capitalism that was announced by Vince Cable a week ago. These are now prophetic and hollow words indeed. And, while the coalition has moved to limit financial bonuses to £2,000, and instead enable banks to reward executives through deferred share payment schemes linked to their firm’s future financial performance, I’m not sure if Cameron has a policy left after hanging Hester out to dry.

If the Tory leader believes bank bonuses are merited, and the reward culture is a fundamental tenet of Conservativism and capitalism, he should say so. If he believes that it would be impossible to find a banker of sufficient robustness to head the RBS if Hester quit over this scandal, he should come off the fence and say so. Frankly, his lack of leadership is allowing Labour – and Miliband in particular – off the hook.

That said, four wider points stem from this bonus row.

First, the collective expertise of the main political parties should have been used when the last Government rescued the RBS. If that happened, loopholes over bonuses could have been reconciled and a consensus reached. The future of the banks is too important to be left to damaging games of political opportunism.

Second, now is the time for the payment structure in the whole state sector to be reviewed. How about a lower basic salary – with a bonus linked to specific performance targets? Chancellors could be judged on deficit reduction plans, council chief executives on whether the bins are emptied, teachers on exam results, train directors on punctuality targets, banks on lending targets and so on.

Third, to what extent should politicians run the banks, bearing in mind Hester’s climbdown only kicks the bonus issue into touch until the next pay round?

And, fourth, is the public’s resentment over executive pay – fuelled by politicians – sending out a damaging message that Britain is no-go area for entrepreneurs?

Yet business high-flyers are the very people, in conjunction with the banks, who will have to create the private sector jobs that are required to sort out the problems created by politicians maintaining unsustainable levels of spending for too long.

That means finding the most able executives to run the banks as the RBS share price plunges following this shameful exercise in political posturing. But will the best people, and they are said to include Stephen Hester, step up to the plate if they have to pay a long-term financial price for the short-term point-scoring by the real villains here: the politicians who failed to regulate the banks and then washed their hands of their role in one man’s bonus?