James Prosser: Osborne's wacky idea is also dangerous

Outlook: The heat haze is obscuring the real issues that the sector and those who regulate it face

George Osborne clearly feels he has been out of the spotlight for long enough. Time to do something about it with an "eye-catching initiative" concerning bankers' bonuses. The shadow Chancellor wants to ban high street banks from paying more than £2,000 in cash bonuses. The limit is designed to enable low-paid staff in branches to still get their performance-related pay.

However, there are large swathes of workers who don't earn that much more, and whose actions contributed not a whit to the credit crunch, who are going to lose out.

The proposal, he says, will free up large sums of money that can be used to get the flow of credit moving again; this is an analysis that is simplistic in the extreme. Banks clearly should be doing more to lend to businesses, but stopping them paying people on relatively modest salaries a bit more is not going to help that. (RBS seems to think that a few patronising NatWest adverts will do the trick. It won't.)

What it does show is that the debate over bankers' bonuses is starting to get ridiculous.

Some of what is still going on is outrageous and infuriating, particularly if you are one of the millions of people who has suffered from the effects of the recession. But the heat haze produced is now obscuring the very real issues that the sector and those who regulate it face. That is dangerous.

It always used to be the case that if the Liberal Democrats came up with something wacky people would say, well, there's no chance of them getting into power. That is not the case with Mr Osborne. Given the state of the economy and of this country's most important industry, one would hope he had something better than this to say about how it should work in the future.

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