Royal Bank of Scotland, which is being bailed out with £45bn of taxpayers' money, is continuing to provide a £1.6m, five-storey Edinburgh townhouse free of charge to its new chairman.

Royal Bank of Scotland, which is being bailed out with £45bn of taxpayers' money, is continuing to provide a £1.6m, five-storey Edinburgh townhouse free of charge to its new chairman.

RBS bought the house in June 2006 for the use of its then newly-installed chairman Sir Tom McKillop.

An investigation by The Sunday Herald revealed chairman Sir Philip Hampton, who is being paid a £750,000 salary and £1.5m in share options, has exclusive access to the A-listed Georgian property on one of the capital's most desirable streets.

The house at 44 Heriot Row - which has five double bedrooms, three bathrooms and commands stunning views over the Firth of Forth and Queen Street Gardens - is available only to Sir Philip, 55, when he is in town on RBS business. The rest of the year it stands empty.

According to RBS's annual accounts, the chairman has about a dozen scheduled board meetings each year.

After the bank bought the house, it spent tens of thousands of pounds on restoration, furnishings and works of art. The renovation was carried out by award-winning Michael Laird Architects, which also designed the £240m RBS headquarters at Gogarburn, near Edinburgh.

Neither the house nor its functions were itemised in RBS accounts. Instead, it was rolled up into the bank's vast asset and investment portfolio. RBS is already under fire for signing off on a £693,000-a-year pension for life for its disgraced former chief executive, Sir Fred Goodwin.

Almost 70% owned by the taxpayer since its collapse last year, the bank could yet become 95% owned by the public if other potential liabilities turn sour. A bank source confirmed the building was for the chairman's exclusive use and no other accommodation was provided for new chief executive Stephen Hester, or board members.

Vince Cable, the Liberal Democrats' Treasury spokesman, who has been vocal in his criticism of reckless banks, called on RBS to put an end to the perk. "This is exactly the sort of profligacy that can't be afforded in a state-run bank. This must surely be a prime candidate for cost-cutting," he said.

MP Stewart Hosie, the SNP's Treasury spokesman, said the townhouse was part of an age of excess which was now wholly unacceptable.

An RBS spokeswoman said: "We constantly look at our property assets to ensure they remain relevant to our business."