A new, more draconian tax on bonuses should be slapped on banks, a leading Liberal Democrat said tonight after the Royal Bank of Scotland chairman admitted that regulation was the only way to restrain the annual bonanza for bankers.

Amid estimates that the City would pay out £7bn in bonuses this year, Lord Oakeshott said the moment had now come to reintroduce a tax on bonuses which, when imposed on the banks last year, brought in £3.5bn for the exchequer.

Oakeshott, a Lib Dem Treasury spokesman, said that the situation was so grave that the government would need to act ahead of the report next year by its independent commission on banking – chaired by Sir John Vickers.

Speaking after David Cameron acknowledged the public's "anger" over bonuses, Oakeshott said: "As the prime minister has made clear, the banks are still paying ever bigger bonuses and not lending to small businesses.

"The answer must be to take immediate action on bonuses and the obvious way is to have a much tougher bonus tax than Labour's feeble feather-duster and much stricter net lending targets to small and medium-sized businesses while we wait for the banking commission to recommend more radical reform."

Oakeshott also addressed the comments made by the RBS chairman, Sir Philip Hampton, who told a City audience on Monday that the only way bonuses could be reformed was with regulation as no bank was prepared to move first in cutting bonuses for fear of causing a staff exodus.

Oakeshott said: "Responsible bankers like Sir Philip Hampton openly admit the bonus merry-go-round is spinning far too fast but no one will risk being the first to get off."

The coalition's agreement for government promised to "bring forward detailed proposals for robust action to tackle unacceptable bonuses in the financial services sector" although no such policies have yet been published. The Treasury is planning to raise about £2bn a year through its levy on bank balance sheets, the consultation period for which closed on Tuesday.

The banks were hit with a 50% tax on bonuses of more than £25,000 by Alistair Darling in his last budget and while the former chancellor had predicted the tax would bring in £550m, it actually produced four times the amount within the four months that it was in place.

The Labour government had promised that it was a one-off tax and had expected it to change the behaviour of banks. The higher-than-expected tax receipts showed that the banks continued to pay out big bonuses even though some banks attempted to cut their payouts. Goldman Sachs, for instance, limited pay for its partners at £1m but last month handed them interim bonuses to prevent them defecting to rivals.

In the face of the mounting public and political anger, the City continued to defend its policy of paying bonuses.

The Lord Mayor of London, Nick Anstee, said that 70% of the £7bn being paid out by banks would be ploughed in to the public's coffers through direct and indirect taxation. "When used properly, [bonuses] are perfectly legitimate tools for a cyclical industry like financial services that can reflect current market conditions while simultaneously making a significant contribution to the UK economy."

The MEP who drafted new bonus rules for Europe urged the UK authorities to stop attempting to water down the measures, which prevent more than 30% of a bonus being paid in cash. Arlene McCarthy said: "Cutting the amount of upfront cash is essential to cutting the incentives for excessive risk-taking. I am very concerned that the UK is trying to undermine that interpretation."