According to both the Chancellor of the Exchequer and the Foreign Secretary, the Royal Bank of Scotland chief executive's decision to forgo his near-£1m share bonus was "sensible and welcome". According to the Leader of the Opposition, Stephen Hester has "done the right thing". Wrong, wrong and wrong again.

The decision was welcome only in that it let the pusillanimous Government off a political hook, and only the right thing in that it scored a point for a signally opportunistic Opposition. Mr Hester's submission to the baying of the mob will have no impact whatsoever on the public finances, will make no difference to the culture of the financial services industry, and will not improve the taxpayer's prospects of a decent return from RBS.

In the end, it was a move of striking hypocrisy from Ed Miliband that tipped the balance. By threatening to call a vote in Parliament to force the quango overseeing taxpayers' 83 per cent stake in RBS to vote "no", the Labour leader made it all-but impossible for Mr Hester not to waive his bonus. The fact so often overlooked by Mr Hester's detractors is that he is contractually entitled to both a £1.2m salary and a bonus of up to £1.5m (both of which are, rightly or wrongly, considerably lower than he might expect to earn elsewhere). Worse still, in Mr Miliband's case, is that those terms were set, agreed and signed off by the previous government, rendering the Labour leader's apparent indignation at best inconsistent, at worst nakedly populist.

Then again, the Government's actions have been only marginally more honourable. Notwithstanding the few feeble arguments that were made in his favour, Mr Hester was largely left to carry the can alone, the Government showing neither the courage of its convictions nor the strength of character to take a lead on an unpopular issue.

It is deeply regrettable that the RBS chief executive has been made the poster child of bankers' excesses, a focus of public rage that is neither justified by his behaviour nor an effective approach to reform.

This is no blanket defence of the financial sector. In the aftermath of a crisis brought on by excessive risk-taking in the banking industry, with taxpayers tightening their belts to pay off overweening public debts, it is absolutely right to question a corporate culture of spectacular rewards only nominally linked to performance. But penalising the high-achieving Mr Hester will hardly do that.

Pay is not a matter of what is deserved – if such a thing could even be determined. Rather, it is a question of market value. And even as the majority-owner of RBS, the Government cannot change the dynamics of the global marketplace for banking skills. The claim that a punitive approach to Mr Hester would set an example to other banking executives would be meaningful only if the Government had the same casting vote elsewhere. Since it does not, there is no lesson of any moment for Mr Hester's counterparts. Neither will tinkering with the tax system, as Mr Miliband recommends, prove much more effective.

For all the sound and fury, the fact remains that the power to change banks' culture of high pay does not rest with any single government. It lies instead with institutional shareholders and industry regulators across the world (particularly in the US, where the bonus culture has its roots). Despite the annual spasms of outrage at bonus time, there has been little meaningful action. Rather than playing to the gallery over Mr Hester, politicians would be better bringing their ire to bear on those who can make a real difference. Until they do, the same row will erupt year after year, although possibly without the sterling services of Mr Hester at RBS. A hollow victory, indeed.