We're back to two Britains, with a vengeance and dismay

The Institute of Directors (IoD) is worried, meanwhile, that there is an "anti-business hysteria" developing in Britain because the commonality fail to understand executive pay. The IoD reports no such concerns from its members over the Government's intention to cut by half the money (currently a maximum of £54 a week) given to help the parents of disabled children.

So tell me: whatever did happen to One Nation Conservatism?

Mr Baker, if it matters, is a Liberal Democrat. He blames Labour, plausibly enough, for the arrangements under which Sir David Higgins, Network Rail's chief executive, could shortly receive a £336,000 annual bonus on top of a salary of £560,000, in addition to a share of a "long-term" bonus pot that could earn him £2.8 million over five years. Five other executives are eligible for equivalent payments, thanks to a "reorganisation" of their "incentive structure".

But why not? Network Rail is a private company and free, surely, to pay as it sees fit. Is it any wonder the Government's powers are limited?

In reality, this utility is in the private sector thanks only to Treasury accounting. The company has no shareholders. Its borrowing is backed by a Government guarantee. It is subsidised both directly and indirectly: in 2010 it got a £3.7 billion state grant and was allowed to raise its prices far beyond the inflation rate. Network Rail is private merely because the Government doesn't want its £20bn debt on the books.

In fact, the company that is pondering Sir David's bonus is currently in breach of its licence obligations. That isn't as technical as it sounds: it just means Network Rail has failed to do its job and ensure that enough trains run on time. It is also in the dock over the deaths of two teenage girls on a level crossing in Essex, and it faces criminal proceedings over the 2007 Grayrigg train crash in Cumbria. Bonuses all round, then.

There is a certain symmetry to all of this. On Wednesday, the Government quashed every last Lords amendment – seven in total – to its hideous welfare bill. Meantime, RBS was trying to work out why there had been such a fuss over Stephen Hester's £1m bonus, now waived, while Network Rail was failing to see the problem with adding a 60% sweetener to the scarcely meagre salary paid to Mr Higgins.

This might explain what the IoD understands as hysteria. The public can probably grasp that a job well done deserves its reward. The public might even concede that an extraordinarily difficult job merits extraordinary remuneration. People encounter intellectual difficulties, however, when Network Rail is in receipt of two enforcement notices from the regulator in December, thanks to a continuing decline in punctuality, and January brings talk of a £336,000 bonus.

It amounts, as these things often do, to an abuse of the language. Where does "welfare" apply when a government can plot to take money away from cancer sufferers after they have spent a single year in what is called – wrongly – remission? Few cancers let anyone off that lightly. The person who can be back to normal in a single year is lucky indeed.

What does bonus mean, equally, in the context of Mr Higgins or Mr Hester? My Chambers dictionary defines the word as meaning an extra payment given when specified targets have been reached. So how does such a payment become automatic, a right, even – that strange symmetry again – a kind of corporate welfare entitlement to which the word failure is never applied?

RBS deems Mr Hester to be brilliant and irreplaceable. Sir Philip Hampton, the bank's chairman, said as much this week. So how was that brilliance measured when the bonus round began? By a collapse in the RBS share price? By the ability to make 33,000 people redundant? By reaching the insightful conclusion that investment banking is a game better left to others? Or by getting decent prices – and for this Mr Hester deserves some credit – for an ill-assorted collection of global assets the bank should not have owned to begin with?

The ruses employed by banking to justify inflated pay are not, of themselves, the issue. The arguments have been well-rehearsed. What has become stark now is the contrast between two Britains, worlds apart. So the Government that merely pleads with FTSE executives to think twice over 30% and 40% pay rises stubbornly defends its right to cut housing benefit, tax credits and aid to disabled children. They have all but said it: decency is no longer affordable. Interfering in corporate larceny is, on the other hand, unthinkable.

The Coalition overturned the Lords this week in order to take £18bn out of the welfare system in a country in which unemployment is rising, real wages are falling, rents are increasing and the very idea of social responsibility is disappearing from public life. The Government's very determination was revealing. It claims that welfare spending has increased by 40% in a decade. The claim would be true in any post-war decade you care to name. Increases in the 21st century have in fact been modest, historically speaking, as anyone attempting to survive on the Jobseeker's allowance (£67.50 for the over-25s) will know.

Meanwhile we wait to see whether Bob Diamond, chief executive of Barclays, will accept a rumoured £10m bonus to top up his £1.35m salary. Meanwhile, Ed Miliband will next week stage a Commons vote – presumably to put David Cameron's rhetoric to the test – on the proposition that pay in British banking is out of control. Astute of him to notice.

Speaking yesterday, the Labour leader said that "too many are getting bonuses which are too big, too often. All companies must show responsibility, but banks have a particular responsibility, because they are either directly or indirectly supported by the taxpayer". He also asserted that "if banks do not change their ways, the only result will be further isolation from society, greater public anger and an economy which does not pay its way". Then what?

Labour wants an employee representative on every remuneration committee: that'll show them. The Coalition meanwhile intends to ignore banking reform until 2017. Meantime, no-one has quite worked out the number of young people caring for disabled parents who are about to see essential financial support disappear. Meantime, the housing benefits cap is about to cause havoc and homelessness – officially known as "an incentive to work" – in the inner cities. Where riots begin.

However they choose to estimate the seriousness of Britain's deficit problem, politicians are not bereft of choices. What Mr Miliband calls the bonus culture is a system for skimming from the top that accounts for billions of pounds annually. Somehow, nevertheless, it is exempt from any national accounting or the kind of reform otherwise beloved of the Coalition.

Labour's leader has this much right: it has become toxic to social harmony. He has this much wrong: saying so is not enough. Those enriching themselves are immune to pleas for responsibility. After all, they are not stupid enough to believe, not for an overpaid second, that we are all in this together.