Bosses at UK banks saved by hundreds of billions of taxpayers' pounds are still demanding – and get-ting – million- pound-a-year salaries, plus bon-uses. And that includes those banks now partly or totally owned by the state and run with public money. And let me rephrase that to make it even clearer.

The leaders of the financial institutions whose performance means they need £700 billion of taxpayers' money to survive are asking to be paid a million pounds a year – plus bonuses in certain cases – and in the cases where the Government and regulators decide, they are saying yes.

There are now four types of high street bank in the UK.

The fully nationalised Northern Rock and Bradford and Bingley; majority state-owned Royal Bank of Scotland; the partly state-owned Lloyds Banking Group; and private banks such as Barclays and HSBC.

RBS and Lloyds together received £37 billion from the Government in October to stay afloat. And a £700 billion fund has been made available to all banks to keep them lending and to insure them against toxic debt losses.

The country needs a robust banking system and if that takes hundreds of billions of public funds, so be it. But you would have thought such a dramatic rescue would create a moral imperative for bosses who took monumental pay increases in the good times to accept the other side of the coin now their institutions have been under performing.

Apparently not.

Lloyds is allowed to pay directors bonuses despite receiving £17 billion aid three months ago from the Government, which means we taxpayers now own a 43 per cent stake in the bank.

The salary for the new chief executive at 58 per cent state-owned RBS, Stephen Hester, is £1.2 million. Bradford and Bingley chairman Richard Pym is on a £750,000 salary and is in with a chance of a £187,000 bonus this year. New Northern Rock boss Richard Hoffman has a basic salary of £700,000 a year.

In case the injustice isn't clear enough already, let's put the £700 billion bailout into context.

It works out at £25,000 for each of the country's 29 million taxpayers, a year's income for the average earner. The Government spends £100 billion each year on the NHS, £74 billion on education, £36 billion on defence and £133 billion on social security.

So the banks have received enough money to run the NHS for seven years or the education system for 10; to fund the army, air force and navy for two decades; or supply five years' worth of support to the unemployed.

Almost as astounding as the bankers' pay requests and the Government's compliance has been the absence of public outcry. The traditional defence of mindbogglingly high salaries – that they are necessary to retain and motivate top performers to drive the economy forward – no longer holds water.

Instead of making wealth, our bankers have created a £700 billion tax burden and the question has to be asked – how much financial motivation do they need? Britain's top-earning banker is reputed to have earned £40 million including bonuses in 2007.

Should we suppose that if his incentive was halved, he'd spend half his working day on social networking sites thinking just the £20 million isn't worth striving for full-time?

Countries with strong traditions of social equality, such as Holland and Norway, disprove the mantra that you can't have a thriving economy without limitless pay for top managers. Executive pay in those countries is roughly half what it is in the UK, but both are ahead in terms of productivity per capita and quality of life, according to business bible The Economist.

The problem in the UK is that the connection between reward and contribution to society has been lost. Teachers and nurses earn £30,000 a year on average. Is the £40 million-a-year banker really worth 1,320 teachers or nurses, or 1,200 civil engineers, or 400 doctors?

Executive worth has become measured in salary per se, rather than in what they add to the greater good. The tail wags the dog. And if the issue of stratospheric pay isn't tackled now, when its wounds are freshest and outrage deepest, will the culture ever change? Competition and incentive is needed to motivate people and excellence should be rewarded, but it has to be done with a sense of proportion in a system that is stable.

Companies with a judicious approach to pay at the top have been doing rather well recently. John Lewis, which rewards all staff with an equal annual bonus, was last week voted the nation's favourite retailer for the sixth time in 10 years. The firm itself believes the bonus policy creates motivated and engaged staff who have driven that success, not to mention years of healthy profits.

At the Bristol Credit Union, whose prudent loans policy allows it to help thousands of low-income families shunned by high street lenders, the chief executive earns no more than two-and-a-half times the wage of the lowest paid worker. He also has the priceless knowledge of knowing he is making his community a more cohesive, happier place to live.

This model has proved good enough to make BCU one of the few regional success stories in one of the toughest years for business ever.

Why not insist on a limit to pay differentials within all companies? That may sound like anti-competitive dogma, but it was suggested by one of the undisputed great free-market entrepreneurs of all-time.

US banker J P Morgan, whose empire grew to make Morgan Stanley, Morgan Grenfell and the eponymous bank he founded three of the world's most important finance houses over the last century, said the highest earner in any organisation should never earn more than 20 times the pay of the lowest.

That would give our banking leaders an annual basic salary of £200,000. Here's to J P Morgan, someone who really knew about wealth creation.