Today's announcement of 4,500 job cuts in Royal Bank of Scotland's UK operation comes as no surprise to the Government, which owns a 70 per cent stake in it.

UKFI, which manages the taxpayer stake in the bank, has been aware of Stephen Hester's plan to restructure the organisation into core and non-core activities for some time and has been equally aware aware that it means large scale redundancies.

The Government's long-term aim - say over five years - is for the bank to recover to a point where it can be sold off, possibly even at a profit.That cannot be done at today's level of employment within the fallen giant. Government insiders say that today's moves have been inevitable since well before the critical decision last October to recapitalise the banks. They say that the chronic mismanagement of the bank before then, with the piling up of ever more toxic assets, is to blame.

But for ministers, today is very awkward politically. With unemployment predicted to hit the three million mark in election year, job cuts of this scale - presumably spread across most constituencies - are deeply uncomfortable.That is why the RBS management has said it will work closely with the staff unions - Unite in Britain - to manage these losses, giving people time to prepare for change and to look for opportunities elsewhere. It wants the unions to help as much as they can with redeployment.

Insiders say that the business plan has been discussed with Mr Hester over the last two weeks, but they are swift to insist that it is the "Hester plan."

Sir Fred Goodwin will remain the villain of this story, come what may. As the Liberal Democrat Shadow Chancellor, Vince Cable, has said this afternoon: “Ordinary workers are now paying with their jobs for the unsustainable and irresponsible practices of RBS’ previous management.

"Regrettably, these job losses are an inevitable consequence of the awful results of RBS over the past year. As he enjoys his multi-million pound pension, Sir Fred Goodwin should spare a thought for the thousands of people he has now put out of work.”

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