Shadow chancellor George Osborne has called for emergency action to ban banks from paying big cash bonuses and force them to lend the money to hard-pressed firms and families instead.
He said premier Gordon Brown and Chancellor Alistair Darling's plans to ease the credit crunch and reform the banks had failed.
Mr Osborne told an audience in the City: "It is time for the Government to act - and act decisively."
He added: "We cannot wait for the Prime Minister's promised land of a new responsible bonus culture which looks more remote than ever. We need to take emergency steps to support bank lending and move the economy forward this winter. The banks have to understand that we are all in this together.
"I am today calling on the Treasury and the Financial Services Authority to combine forces and stop retail banks - in other words the banks that lend directly to businesses and families - paying out profits in significant cash bonuses. Full stop. That includes their investment banking arms. Then the cash that would have been paid out should be put on to banks' balance sheets explicitly to support new lending."
Mr Osborne stressed he was not trying to block cash bonuses for low-paid counter staff or call centre workers. And he said where firms needed to award bonuses to high-flyers to remain competitive they should be paid in new shares in the companies.
The shadow chancellor said Britain would then be in step with President Barack Obama's administration: "The Obama administration's new policy will see the cash remuneration of the top bankers cut by 90%, and banks have been told to pay out in shares instead. America is acting. Britain at the moment is not. We are a party that believes in enterprise and a competitive economy.
"We know financial services have a huge role to play in Britain's future. The politics of envy will play no part in our plans. But we do need the politics of common sense. There can be no justification for using taxpayer support and guarantees to pay cash into the bank accounts of bankers when the rest of the economy is in such desperate need of that cash."
The shadow chancellor also urged the introduction of new, smaller banks to lend "responsibly" to families and businesses and said the country urgently needed a plan for growth and to restore economic confidence.
Chief Secretary to the Treasury Liam Byrne said: "George Osborne made the wrong call on saving the bank system - and now he's trying to play catch-up. The problem is he's playing it badly. The bonus plans he's floating are weaker, not stronger than the change we've already put in place."
