We need the money more than the bankers do

The majority of people in Britain are being hit by the worst economic situation in our lifetimes, while those who caused the problem - the bankers - continue to rake in the rewards.

It is little over a year since the financial system descended into crisis. But now banking giant Goldman Sachs is set to pay a recordbreaking £14 billion in bonuses - the highest in its history.

The average bonus payment is estimated to be £500,000. Four-fifths of City workers expect their bonuses to be the same as last year or larger.

Yet the only reason any bank at all is making money is due to taxpayers' direct and indirect subsidies here and abroad. The financial sector was saved by money we stumped up.

Banks now benefit from a subsidy that the miners could only have dreamed of. The gluttony of the latest bonuses is not justified.

Goldman Sachs may not have been nationalised in the United States but that makes no difference to the fact that it and every other bank benefits from a virtuous circle that we pay for and have created.

The banks can make money only because of being able to borrow at ultra-low interest rates and then lend at higher ones.

Liquidity exists because of what the state has pumped into the economy. Yet still too little reaches those who need it most, such as the companies that need to borrow.

And many institutions that banks such as Goldman Sachs do business with are solvent in the first place only because of the taxpayer.

Without public support for the banking sector, Goldman would have gone bankrupt with all the others.

Unfortunately, political debate is focused not on how to revive the economy but instead on what should be cut from public spending.

The public finances have deteriorated because tax revenues have fallen with output, profits and employment, alongside those immense sums transferred from taxpayers to bank shareholders.

The Government must break out of this trap. Spending cuts would reduce demand in the economy and worsen the impact of the recession.

The political course that has been adopted in London since the recession began, where the Mayor has been a constant voice for the most privileged and a defender of the worst of "masters of the universe" bankers, banging the drum for hedge funds and insisting that the rich should pay no more tax, is exactly wrong.

When George Osborne, Boris Johnson and co insist that spending is slashed, that people work longer but their pay is frozen and their fares must rise, we ought to contrast it with the generous subsidy handed to the bankers that is turned into bonuses and payments to shareholders.

What the economy needs now is to raise investment and increase growth.

The banks we have bailed out must be instructed to lend to people and businesses. We must invest in those parts of the economy that have collapsed, like building new homes.

And instead of imploring bankers to throw a few crumbs from their table, we need fair taxation of the highest incomes so that low and middle-income earners do not shoulder the burden of paying for a situation they did not create.