Royal Bank of Scotland is set to reignite the row over pay tomorrow when it will reportedly reveal a £550 million staff bonus pot despite slumping into the red with an expected £8 billion loss.

The taxpayer-backed lender has agreed the bonus windfall with UK Financial Investments, the body charged with managing government stakes in banks, according to Sky News.

This would be a drop on the £607 million haul for 2012, although this is partly expected given the significant headcount reduction in its investment banking team.

The bonus haul will be controversial given the losses expected at RBS and as a strategy review by chief executive Ross McEwan is likely to reveal a major downsizing as the bank refocuses on retail customers, small businesses and larger corporates.

There are fears over large scale job losses as reports suggest its 120,000 strong workforce could be reduced by around a quarter, although much of this is thought likely to come from plans to sell off businesses and exit from many of its riskier investment bank activities, as well as much of its overseas operation.

Mr McEwan will also give his verdict on the group's troubled Ulster Bank subsidiary, which has been put under the microscope as part of the group-wide review.

He said in a video posted on the company's website last week: ''My aspiration is not to run the world's biggest bank.

"My aspiration is to run the best bank in the UK - nothing to do with size.

"A lot of our costs are old costs related to a big global group that we are not any more.''

It is expected to make heavy cuts to the 11,000 jobs in its investment bank, including a retreat from its US and Asian markets businesses.

The planned sale of its US retail bank Citizens will remove 18,500 jobs, while further reductions will come from its float of Williams & Glyn's, which employs about 4,500 staff.

The bank's full-year results will lay bare the scale of the turnaround job that lies ahead and will come in stark contrast to the fortunes of fellow bailed out player Lloyds Banking Group, which returned to bottom line profit for the first time in three years in 2013.

RBS, which is just over 80% owned by the Government, is thought to be heading for an annual loss of close to £8 billion for 2013 after it stunned the City last month by revealing a string of scandal-related financial charges worth more than £3 billion.

Its latest round of provisions include £1.9 billion to cover mainly US action over mortgage-backed financial products, an extra £465 million to payment protection insurance (PPI) compensation and another £500 million for mis-selling of interest rate swaps to small businesses.

The bank was already facing bad debt write downs of up to £4.5 billion in the creation of an internal ''bad bank'' to wind down toxic loans.

The losses also come after a calamitous year for IT glitches at RBS, prompting Mr McEwan to admit it had failed to invest properly in systems for decades and pledge hundreds of millions of pounds in new investment.

RBS has sought to deflect flak over bonuses by scrapping 2013 payouts for its eight-strong executive committee in the wake of its recent shock provisions update, while Mr McEwan has already said he would not take a bonus for 2013 or 2014.

But any banker windfalls will court controversy given that it is still heavily loss-making and under investigation over allegations of unscrupulous treatment of small firms.

The group is facing a series of investigations after a shocking report from government adviser Lawrence Tomlinson accused RBS of driving firms to collapse in order to profit from their property assets.

The bank has fuelled anger further over bonuses by recently confirming it was considering plans to request shareholder permission to pay bonuses of up to double an employee's salary for 2014 onwards - the maximum allowed under new EU rules to cap payouts.

It will no doubt also be pressed on whether it plans to follow the lead of rivals such as Barclays and HSBC by introducing monthly allowance payments to sidestep the rules further and boost potential bonuses.