Support for curbs on bankers’ bonuses has hardened significantly in the Cabinet as ministers realise that they must keep in step with public opinion.

Most members of the Cabinet now favour a cap on bonuses — a big change since last Tuesday when, in an anguished debate, ministers argued over how far to go without ruining Labour’s relationship with business.

Harriet Harman, Labour’s deputy leader and Leader of the House of Commons, took the most aggressive line, arguing that bankers who are are known to have failed their businesses in recent years should pay the money back. Outside the meeting a fellow minister denounced that as the “Taleban position” and accused Ms Harman of grandstanding for a future Labour leadership election. Around the Cabinet table Ms Harman found herself being taken to task by the Blairites Hazel Blears, the Communities Secretary, and John Hutton, the Defence Secretary, who argued that Labour would damage its reputation for supporting aspiration, and would deter professionals from entering the banking profession.

A week later and the view of her Cabinet colleagues has changed, if not quite to her position then well on the way towards it. The reasons are threefold. First, the performance of banking chiefs in front of the Treasury Select Committee last week. Yes, they apologised but their sincerity was doubted and the cavalier way in which some talked about massive salaries and bonuses left ministers perplexed.

Then there was the public reaction to the hearings. A Times poll showed that the vast majority of people favour action to restrain bonuses.

The third and most important reason was the leak on Sunday that Lloyds was thinking of paying out £120 million in bonuses to its staff. Downing Street and the Treasury were furious at what they saw as an attempt to get the news out before UKFI, the arm of the Treasury that manages the taxpayer interest in banks, had been told of the bank’s intentions. They think that the same happened with RBS, whose bonus intentions surfaced before the Government knew of them.

No one hates being behind the curve more than Gordon Brown. By Sunday evening, several hours after David Cameron proposed a £2,000 cap on bonuses, it was clear that Mr Brown would have a very big say in what gets paid out.

Even on Thursday he was talking of “clawing back” bonuses in future if traders lost their banks money, a step towards Ms Harman.

Despite all of that Mr Brown, Alistair Darling and Lord Mandelson, the Business Secretary, know that they have to be careful about what they do on bonuses. Lord Mandelson did not side overtly with Ms Blears and Mr Hutton on Tuesday and instead said that the Government as well as the banks had to take account of public opinion.

He, Mr Brown and Mr Darling know that there has to be a system that incentivises good performance. The Government needs the banks to start working properly and to lead the recovery by lending again. It needs the nationalised and part-nationalised banks to start performing well enough to return one day to the private sector.

That will not happen if the best performers leave to work for competitors because their bonuses — which investment bankers particularly have come to see as a guaranteed part of their earnings — are taken away.

So the discussions with Lloyds and RBS are focusing on how they can respond to public outrage over the banks, and their trading results, by limiting their payouts for last year, possibly by restricting them to share bonuses. For the future there will be a bonus system but it will be related to a banker’s performance over a longer period of time, not one good year.

Meanwhile, the Financial Times reported last night that Alistair Darling is looking to boost the Treasury by recruiting bankers who have lost their jobs in the credit crunch. Up to 70 places may be created.

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