Andrew Tyrie, who chairs Parliament's commission on banking standards, wants to let privateers cherry-pick parts of the bank and make the taxpayer shoulder bad debts.
Splitting RBS into good and bad banks was just one option given in a recent report by the cross-party commission.
But even austerity-obsessed Chancellor George Osborne (picture) is believed to be unenthusiastic about the prospect.
Mr Tyrie has now urged the Chancellor to examine the "future structure" of RBS as "a matter of urgency."
In a letter to the Financial Times laced with bankers' jargon, he argued: "Formal accounting conventions should not be allowed to get in the way of what is best for the economy."
Left Economics Advisory Panel co-ordinator Andrew Fisher said the misplaced debate centred on "what is the best way to privatise RBS."
He explained: "Tyrie argues the taxpayer will get more in the sell-off if the public first absorbs the toxic debts as a 'public bank.'
"Osborne worries that the public bad bank would worsen his deficit figures and that the toxic debts aren't too bad anyway."
But Mr Fisher said: "Labour should be calling for a publicly owned bank that can invest in new infrastructure to create jobs, reduce unemployment and operate in the public interest - something neither side of the Osborne-Tyrie pantomime cares about."