David Prosser: Bankers will just have to get by on lower salaries

Outlook: Who says it would be impossible to cap bankers' pay? In Ireland, they've just done exactly that. The Irish government has told the seven banks which now have the benefit of a state guarantee underwriting them that they must pay executives no more than €500,000 a year. That goes even further than the recommendat-ions drawn up by an Irish committee on bankers' pay, which said existing salaries for Ireland's top bankers, around €700,000, were justifiable.

In fact, the new cap is slightly higher than the $500,000 limit on annual pay for executives at state-backed US banks set by President Obama last month. But the point about these gestures is not so much the detail, but their symbolism.

By setting a limit on bankers' pay, you make a public statement about your determination to tackle excess. And you offer some comfort to those who aren't fortunate enough to have shared in the banking bonanza, who understandably now want these people bashed in some way.

Gordon Brown is determined to make bankers' pay a central theme of next month's G20 summit. The Americans are also making more noise about the issue with Barney Frank, the head of Congress's finance committee, and Andrew Cuomo, the New York Attorney General, holding talks on how they might deal with Wall Street pay.

Both the Americans and the British want to deal with this issue by laying down rules linking pay to long-term performance, rather than setting specific caps. That may be a more sensible approach in the long run, though it will be much less satisfying for those who want to see bankers thrown to the wolves.

Either way, those who say the discussion about bankers' pay is a distraction from the real issues of the credit crunch and the global recession miss the point. Until we tackle the culture of excess and its links to outlandish short-term risk-taking, we cannot begin to move on.