Rishi Sunak is pushing ahead with Liz Truss’s plan to axe the cap on bankers’ bonuses despite warnings that boosting bumper payouts for the rich is “obscene”.
Scrapping the limit on multimillion-pound bonuses for high earners is one of the only policies to survive the disastrous “Trussonomics” period last autumn.
Mr Sunak has approved his predecessor’s policy to get rid of the post-Brexit rules around capping bonuses – inherited from the EU from when the UK was still a member.
It comes around a year after former chancellor Kwasi Kwarteng first revealed plans to change the bonus rules as part of the mini-Budget fiasco which sparked market panic.
Even Boris Johnson had reportedly backed away from taking the step because he feared a huge political backlash during the cost of living crisis.
On Tuesday, the Financial Conduct Authority (FCA) and Bank of England’s Prudential Regulatory Authority (PRA) confirmed that the current bonus cap will be lifted on 31 October.
The move – part of a bid to help London’s financial centre fend off competitors after Brexit – was immediately condemned by unions as “an insult to working people”.
Darren Jones, Labour’s shadow Treasury secretary, mocked the PM for following his predecessor. “When Truss says jump, Sunak says how high,” he said.
Mr Jones added: “At a time when families are struggling with the cost of living and mortgages are rising, this decision tells you everything you need to know about the priorities of this out-of-touch Conservative government.”
The lifting of the cap will allow bankers to earn double their fixed pay in bonuses— (PA)
TUC general secretary Paul Nowak said it was an “obscene decision”, adding: “City financiers are already enjoying bumper bonuses. They don’t need another helping hand from the Conservatives.”
The TUC boss added: “Rishi Sunak has shown once again that he is more interested in feather-nesting the super-wealthy than helping struggling families.”
Unison’s general secretary Christina McAnea argued that anyone who thinks that making bankers “even richer” will achieve anything positive “is utterly deluded”.
She said: “It’s beyond belief that the disastrous policies of Liz Truss are being reheated. She trashed the economy and everyone else is still paying the price. This won’t win public sympathy for a government in desperate need of it.”
Labour leader Sir Keir Starmer previously attacked the plan as amounting to “pay rises for bankers, pay cuts for district nurses”.
The move could cause Sunak’s approval rating to fall even lower than it currently stands— (Downing Street)
The cap – introduced despite UK opposition by the EU in 2014 in the wake of the banking crisis – requires bonuses to be limited to no more than 100 per cent of fixed pay, or double that with shareholder approval.
The cap is believed to have irritated US investment banks that employ tens of thousands of staff in London, because Wall Street typically offers lower fixed salaries with big performance-related bonuses.
The FCA and the PRA said on Tuesday that axing the cap would allow for “prudent risk-taking” in a bid to boost competitiveness in the City.
A spokesperson said: “The removal of the bonus cap gives firms the freedom to restructure their pay over time, within the framework of the regulators’ rules on variable remuneration which aim to better align remuneration with prudent risk-taking.”
Evading responsibility for the move, a Treasury spokesperson said: “Decisions on renumeration in the banking sector are for the PRA as the independent statutory regulator.”
No 10 also appeared to distance itself from the move. Mr Sunak’s official spokesperson said it was an “independent” decision for the PRA. “Regulatory independence is important and we don’t intend to cut across that independence.”
Criticising the move, financial commentator Paul Lewis said: “Apparently bankers only work to their best if they are paid more than three times their actual salary.”
Tax campaigner Richard Murphy also attacked the changes on X, formerly known as Twitter. “As if evidence was required that Tory UK is run for the benefit of bankers,” he said.
