People are right to be angry over bankers' bonuses but we must be careful not to drive away our strongest industry, a former policymaker has said.
"We've had the longest period of no growth in wages since the 1920's," former Bank of England Monetary Policy Committee member Sir Richard Lambert told Sky's Jeff Randall Live.
"Last year was a really tough year for most people and on family budgets.
"However, this (banking) is our most successful, competitive global industry. We'd better be careful not to drive it off-shore."
Nonetheless, Sir Richard said that money that goes out in big compensation packages does not go into a bank's capital to strengthen its position.
Meanwhile, Shadow Leader Ed Miliband repeated his calls for lower bank bonuses in a speech on Tuesday.
He said tackling big bonuses was not anti-business, as claimed by many in the Government.
"It is pro-business to demand responsibility at the top and an end to the something-for-nothing culture which has damaged our economy in the financial crisis at every level, wrecked businesses and left everyone else squeezed," Mr Miliband said.
But the Labour leader has also called for yet another tax on bank bonuses, sending across a confused message.
"We want and need banks to have as strong a capital base as possible," Sir Richard said.
"And so I think the argument should be to argue against massive compensation rather than to have massive compensation with massive tax."
Ed Miliband said the Government's intervention on bonuses has been haphazard and belated, and has widened his attack on bankers' pay to include bank's that are not state-backed.
"Some argue that it is no business of the public what bonuses banks pay. I fundamentally disagree," he said.
"Because even banks which are not publicly owned, implicitly benefit from a taxpayer guarantee, to the tune of billions of pounds.
"That is why we need change in the bonus culture across all our banks."
The call comes on the eve of the annual results and staff bonus announcement from Barclays (LSE: BARC.L - news) .
The company's boss Bob Diamond is said to be the highest-paid banking executive and in line to receive a multi-million pound bonus.
Although, he did not want to take a particular view on Mr Diamond's position, Sir Richard agreed overall the culture of large remuneration packages needed to be controlled.
"If you aggregate the bonuses and the compensation and say, 'Had that stayed in the banks' balance sheets, would they have been better off?' the answer is, 'Yes, they'd have been a heck of a lot better off,'" he said.
In recent weeks, Stephen Hester, the chief executive of the 82% state-owned RBS (LSE: RBS.L - news) bank, has agreed to waived his bonus and Sir David Higgins, boss of Network Rail, has said any extra money he was entitled to would be paid instead to a safety fund.
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