Chancellor wants to scrap cap on bankers' bonuses to boost City of London

New chancellor wants to remove cap bankers' bonuses, which could further widen the gap between rich and poor as the recession looms.

The cap was introduced after the financial crash of 2008 - as part of measures to reduce the risk-taking that caused it - but Kwasi Kwarteng believes the rules make it harder to attract top staff to the City of London.

The Treasury says no decision was taken and Boris Johnson backed away from taking the plunge because he feared political backlash during the cost-of-living emergency.

Keir Starmer had accused the Prime Minister of time of "returning", decr iving the idea of ​​scrapping the cap as “pay rises for bankers, pay cuts for district nurses”.

The restriction, introduced in the face of British opposition by the EU in 2014, requires bonuses to be capped at 100% of fixed salary, or double with shareholder approval.

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If bonuses are not capped, this would happen as millions of workers, especially in the public sector, would face pay cuts in real terms as wages do not keep pace with inflation set at 10%.< /p>

Mr. Kwarteng is keen to boost London's competitiveness against New York, Frankfurt, Hong Kong and Paris, according to people briefed on the discussions who spoke to the Financial Times.

A The Al executive said removing the cap would be a "clear Brexit dividend". Something you can present as a victory".

The Chancellor will present a mini-budget next week, after promising to "do things differently under new leadership" and bring back annual economic growth to 2.5%.

The end of restrictions on bankers' bonuses is seen as a way to boost growth and allow the UK to reduce its huge budget deficit over the medium term.

The decision would be framed as part of a package of measures that is already providing considerable help to ordinary families thanks to the two-year freeze on household energy bills.

However, it is possible that Mr Kwarteng will leave the changes to the City of London at a later date - with next week's event already set to include £30billion in tax cuts for the wealthy.

The cap has annoyed US investment banks that employ tens of thousands of employees in London, as Wall Street generally offers lower fixed salaries with large performance-related bonuses.

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"Taxation risks pushing the best employees to the United States where they can be paid more," one financial services executive said, adding, "But it will be publicly difficult to sell in times of austerity."

Richard Gnodde, head of international operations at Goldman Sachs, told the Financial Times eliminating the bonus cap would make "London a more attractive place for sure".

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