Bankers v Government: Pay the bonuses, we all benefit (or why John Prescott is a fool)

Yes, the last 18 months have incredibly difficult for the country, and millions are unemployed because of a crisis triggered by greed among the banks. It makes complete sense that it feels wrong to give many of the bankers who caused the crisis a bonus.

But there's a reason we bailed out the banks but aren't stepping in to rescue Corus, or haven't bailed out the many firms which have gone to the wall. It's because we can't live without them.

And so we have billions tied up in them. And as taxpayers, we want that money back. There are two things we can do.

The first is to pander to the public, still keen to see pain shared by the bankers, and insist a bonus isn't paid. That would force the board of directors to stand down. In a way, that would be a good thing. What does it tell you about the judgement of the directors that they default to "back us or we'll quit" so quickly?

But the second option highlights the danger of going down the first route. If we don't pay the bonuses, then the bankers who know they can get them elsewhere will simply go elsewhere. And what happens then? Well, we either get a whole bunch of eager young bankers coming through and potentially taking bigger risks, but still making money most of the time. Or, as is more likely here, the banks that weathered the recession will get stronger with the best bankers and the ones we own struggle along behind.

That means we don't get the money back quickly, and we end up with a sickly public sector-esque division of the banking system. And that's bad for everyone, not least the most vulnerable in society, who rely on a state system which is creaking under the pressure of debt - debt which would be massively helped by the return of our cash.

Good old John Prescott, the tub-thumping (!) ex deputy prime minister, was on his old class soapbox tonight on Five Live saying it was outrageous that the bankers who caused the crisis were demanding bonuses for continuing to make money.

His argument is that they wouldn't have jobs if it wasn't for state money. He's right, but if we hadn't intervened, we'd all be a lot worse off. Prescott, quite nastily I felt, tried to link it to the hundreds of jobs going at Corus. There isn't a link, unless you congratulate the government for averting the banking crisis but then ask why they didn't deal with the manufacturing crisis which has been ticking over throughout New Labour's reign.

Bankers didn't cause the Corus crisis. Politicians didn't either - but they were the ones best placed to help and Prescott's government failed.

If Prescott and the 30,000 people who signed his petition calling for a ban on bonuses are serious about pointing blame for the fact bonuses are even still on the table, they need to look to Downing Street.

Who negotiated the deal which meant there was any wriggle room at all on bonuses? Who negotiated the deal which pumped billions into these banks on the basis they'd pass it on to businesses, only to find the banks sitting on it? Which Government led the credit charge in the late 90s, spending money it didn't have making itself popular? That's right, Labour.

But that doesn't really fit with the Go Fourth campaign, does it Mr Prescott?