George Osborne, the shadow chancellor, announced last week that he would call on the Treasury and the Financial Services Authority (FSA) to clamp down on bank bonus payments.

The cuts would be made a condition of financial institutions continuing to be covered under the government's asset protection and asset purchase schemes. In effect the message was abide or be abandoned.

His statement was far from wholeheartedly welcomed. Alastair Campbell, a former Labour Party director of communications, writing in a letter to the Financial Times, accused Osborne of being "more interested in short-term political tactics than he is in long-term economic policy".

The main criticism of the proposals were that their substance would threaten to create a two-tier banking structure with taxpayer money ironically becoming a toxic asset on a bank's balance sheet.

"The trouble is that when you get politics mixed up with investments you have reasons to worry," says Tim Cockerill, the head of research at Rowan and an Adviser Fund Index (AFI) panellist. "It is a popularity approach and I think it blurs discussion of broader issues about banking regulation."

There appears to be a broad agreement that the paying of large bonuses after the near collapse of the banking system is at least a little distasteful. As they stand, however, the government's albeit forced equity investment has left the taxpayers' interests aligned with those of the banks.

Osborne is attempting to use this investment as leverage to force bailed-out institutions to fall into line, but in doing so he threatens to make them look uncompetitive in the marketplace and unappealing for investors.

"It's perfectly reasonable that banks who accepted government money shouldn't be paying themselves large bonuses," says James Davies, an investment management researcher at Chartwell. "What's important is to clamp down on rewards given for taking on short- term risk and I don't see anything in these proposals to deal with that."

Indeed, there are few complaints over whether the measures would in themselves be severe enough to dissuade the financial sector from indulging in the excesses of the recent past.