Chancellor Kwasi Kwarteng is considering scrapping the cap on bankers’ bonuses, under a post-Brexit overhaul of City rules.
The cap introduced by European Union legislation in the wake of the 2008 financial crisis limits annual pay-outs to twice a banker’s salary, and removing it would prove controversial.
Sources close to Kwarteng said that no final decisions had been made, but suggested such a move as part of a wider package would make London a more attractive place for global banks.
Liz Truss’ new Chancellor has promised a growth-focused shake-up of the economy and told bosses last week: “We need to be decisive and do things differently.”
But allowing bankers’ bonuses to soar as millions feel the strain of the cost-of-living crisis would leave the UK Government open to easy criticism from opposition parties.
While prime minister, Boris Johnson was forced to say he was not planning to lift the cap, as he faced a political backlash for reportedly considering the move in June.
Labour leader Sir Keir Starmer accused him of plotting “pay rises for City bankers, pay cuts for district nurses”.
Lifting the cap would also come at a time when the government is refusing Labour’s demands for the multibillion pound strategy to help families and businesses through the energy crisis to be paid for by a windfall tax on the soaring profits of gas and oil giants.
City bosses have been critical of the cap, but its supporters say that unfettered bonuses aided the excessive risk-taking that led to the financial crisis.
Next week Kwarteng is expected to announce a mini-budget to help the country as it faces soaring bills stemming from Russian President Vladimir Putin’s invasion of Ukraine.
But it was unclear whether an announcement on bankers’ pay would come in that 'fiscal statement', or as part of a wider package later on.
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