Royal Bank of Scotland directors are threatening to quit if the Treasury blocks plans to pay out an estimated £1.5billion in bonuses to staff.

Board members of the bank - which is 84% state owned - were reportedly advised to resign if they lose the power to run the bank for the benefit of shareholders.

Chancellor Alistair Darling has indicated that he is prepared to veto the amount of money that the RBS intends to pay in bonuses, which is around 50% bigger than last year.

The bank will now have to agree the size of this year's payouts with UK Financial Investments (UKFI), the body set up to manage the public stakes in banks.

A Treasury spokesman said: "As a major shareholder UKFI needs to be satisfied that RBS's approach to remuneration is in keeping with the FSA's code of practice.

"We expect other institutional shareholders will be equally concerned to ensure remuneration practices do not pose a risk to the stability of the organisation."

An RBS spokesman said: "Our agreed business plan requires us to operate commercially in competitive markets and this plan underpins the prospects of recovering value for taxpayers and other shareholders alike.

"UKFI, as with our other shareholders, has to date engaged with us positively in reiterating this goal and we expect that to continue.

"At the same time we understand and embrace the need to ensure pay meets the new G20 and FSA requirements and will continue to advocate this and other ways to address public concerns relating to banks and always pay on the principle of no rewards for failure."

TUC general secretary Brendan Barber said: "The banks nearly brought down the whole economy only a year ago. Few would have survived without Government or Bank of England help. Yet now we learn that they are back to the bad old days when they confused their telephone numbers with what they were paid."

Liberal Democrat Treasury spokesman Vince Cable urged the Government to be "very firm" with the RBS board. He said: "I think this confrontation has been a long time coming. The bank is still operating as if it is a private bank in the good old days before it had to be rescued, before Fred Goodwin ruined it and imposed vast costs on the taxpayer.

He added: "I think the government has just got to be very firm here and say, 'Well, if you want to go, you go, and we will install a team of management that is willing to run the bank in the national interest as long as it remains under public ownership'."

Business Secretary Lord Mandelson said he "understood" the point of view of the RBS directors, but the government was entitled to demand "restraint" on bonuses.

Speaking on a radio interview, he said: "The government does not run RBS, it is run by its management and its board.

"Equally we own a very large part of it and we are entitled to express our views as we see the public's interest, and we are entitled to represent and reflect public opinion on this equally.

"My own view and the government's view is that restraint has to be exercised by RBS and other banks.

"But I understand the point of view that RBS directors are expressing.

"They say they have to remain competitive in the market for recruiting senior executives, and that is why it is important that all the banks are equally restrained and that RBS is not singled out."