Taxpayer cash used in the bank bail-out will come with strings attached over pay and lending policies, with the prospect of a "proper return", the Government insisted today.

Gordon Brown and Chancellor Alistair Darling made clear that the taxpayers would have the ability to potentially profit under the stake-buying scheme.

And banks would not have a licence to trade as normal, with tight controls to ensure curbs are placed on excessive pay and bonuses.

Mr Darling said the Government would not go as far as setting bank pay packages, but suggested the days of excessive bonuses were over.

He said: "We, the Government, are not going to decide on people's pay. That would be, frankly, ridiculous.

"What we have said though is that the Financial Services Authority is looking at these things, it is drawing up a code, particularly to deal with the question of people's incentives where, frankly, there were cases where people were incentivised in such a way as they ran up huge risks for their banks - that was bad enough - and then that's come back on the rest of us."

In return for the £50 billion hand-out, the State will own so-called preference shares in participating banks.

Preference shares effectively give stakeholders a priority over other stock in terms of earnings and payouts should a company go bust.

They pay a fixed rate of interest instead of a dividend, which has to be paid before other shareholders receive anything.

Preference shares do not carry voting rights.

The Government was at pains to point out today that the shares deal will mean that taxpayers are not just handing over money for free - the stakes will allow them to participate in any future recovery in the banking sector.

But with shares having been so under pressure amid the current financial turmoil, any profits from investments in banks appear unlikely for some time and are certainly not guaranteed.

Details from today's package also suggested that banks will be free to seek funds from other new and existing investors to help boost capital, with the Government pledging to assist in "ordinary equity fund-raising".

For participating banks, the deal is designed to repair balance sheets that have been battered by multibillion-pound write-downs from the credit crunch.

It will increase what is known as tier one capital ratio - a key measure of a bank's financial strength - and as a result hopefully give banks confidence to begin lending to each other again.

In return for this lifeline, the Government is demanding that banks sign-up to terms and conditions.

Dividend pay policies and executive pay will be taken into account, while banks will also have to commit to supporting lending to small businesses and home buyers.

Barclays already said it believed the measures would lead to the increased provision of credit to households and businesses.

The deal will not see the Government take a seat on the board of participating banks, although no detail has yet been given on the potential size of the stakes the Government will hold.

The Treasury will now enter talks with the banks over the level of capital funding needed, but confirmed that the deal would see their financial positions secured to agreed levels by the end of the year.