The Edinburgh-based banking giant, set to receive a £20 billion handout from the UK Government, is to allow all 100,000 of its staff across the UK £10 per head for this year's celebrations.

Individual departments will then be able to bring together the money and use it towards their annual celebrations.

The party windfall, which bank sources say is "fairly modest", comes just days after it was revealed that RBS spent more than £300,000 entertaining 40 senior employees and 30 partners from its Bancassurance department at its Gogarburn headquarters.

The latest details to emerge about spending on staff entertaining have raised more concerns at how taxpayers' money is being spent. SNP Central Scotland MSP Alex Neil, a member of the Scottish Parliament's finance committee, said: "I don't want to be a party pooper, but spending £1m on Christmas parties when so many pensioners have lost their savings as a result of the RBS share collapse is obscene. A degree of economy and sacrifice needs to be shown from the top down. It is bad enough that its chief executive is getting £1.2m a year plus shares.

"There is a lot more to this situation now and banks have to realise that it is taxpayers' money they are spending. They're playing with fire when they spend £1m on Christmas parties when so many are feeling the pinch."

The amount RBS is to spend will be the same as last year – despite the recent turmoil that has seen it effectively part-nationalised.

Rival banks have moved to scale back spending. Barclays and Morgan Stanley have both told staff they will not be funding Christmas parties, but Lloyds TSB has said it will allow staff a "modest" amount. A spokesman for HBoS said: "We do not have any set criteria for Christmas celebrations for staff. When staff do celebrate Christmas together, we ensure the cost is modest."

Independent Lothians MSP Margo MacDonald added: "I take it RBS have sacked all of their public relations staff?"

RBS was not willing to formally defend its Christmas party contribution, but a source at the bank said: "Our policy has always been that the group will contribute up to £10 to individuals for Christmas parties. It is done on a departmental basis at a business level. The contribution is fairly modest.

"We have 100,000 staff up and down the country working hard for the company. It is really important to continue to recognise that and continue to motivate staff."

Mark Wallace, campaign director for the Taxpayers' Alliance, said: "This seems like a fairly limited programme.

"What we do want to make sure is that there are not any behind-the-scenes parties going on for the elite in the company."