Could RBS bonus row cost the state? If Miliband and others are to be consistent, their attacks will not stop with Hester. Already, John Hourican, the head of RBS's investment bank who earns around £6m a year, is coming under pressure. Ellen Alemany, head of RBS's US operations, pocketed £5.8m last year. And, as we report today, five of the lender's top investment bankers are set to share a whopping £30m. Last year, around 100 RBS bankers received over £1m. The issue, as it has always been, is whether RBS is a commercial organisation or a nationalised institution. It is the same schizophrenic problem that Alistair Darling had to grapple with when he rescued the bank with £45bn of taxpayer money in 2008. The best chance of getting the money back has always been to run it as a commercial business, but that means playing by the bankers' rules - including their bonuses. That is the course the Labour government chose, and the Coalition has endorsed. To skirt round the problem of state-endorsed multi-million pound bonuses, Darling set up UK Financial Investments (UKFI) - an "arms-length" organisation owned by the Treasury in charge of managing the stakes in RBS, Lloyds Banking Group, Northern Rock and Bradford & Bingley. UKFI was designed to be the "buffer" to protect RBS from political interference, to ensure that the bank could continue to hire high-calibre people for important roles. Until recently, it had largely succeeded. In the last few months, senior insiders say, strategy has increasingly been dictated by politics. The rushed decision to downsize the investment bank, formerly a core business, was just one example. The row over Hester's bonus has "now compromised completely" UKFI, the source said. The idea that they are the buffer now is bull. How do they allow RBS to recruit good people and preserve value? UKFI's job has just been made a whole lot more difficult. To quote Lord Oakeshott, former Liberal Democrat Treasury spokesman who was a critic of the award although a fan of Hester, if UKFI is arms length, "it has very short arms indeed." The politics of Hester's bonus has made starkly clear the fact that the authorities have to make a decision. As the top banker put it: "You can't go through this annual farce of being offered a bonus every year and then having to give it up. What they have to decide is what's the right number. In Ireland, the government has decided to cap all annual remuneration - including bonuses - at Allied Irish Bank at €500,000 (£418,000) for two years. Not even Miliband has proposed such drastic action, though. Britain has taken a very different tack. Even at the fully-nationalised Northern Rock, the chief executive qualified for an annual bonus of 1.2 times salary and a long-term plan worth another 0.75 times salary. That came on top of base pay of £700,000 and a £280,000 annual pension contribution. Hardly a public servant wage. Even Lord Oakeshott has no objection to the principle of paying Hester a bonus. "There is nothing wrong with paying a lot of money, you've just got to be totally clear what the criteria are," he said. One central problem appears to be that the construction of the award, made at the discretion of the remuneration committee, was not clear to anyone else. One solution, Lord Oakeshott said, could be a new package that is entirely transparent. That might help, not least by allowing a public debate on the issue well in advance of the pay. Either way, Hester - who is banking's least worst offender - faces an arduous rehabilitation, and protecting the taxpayer's £45bn investment has just become even more fraught.