The UK is considering scrapping a cap on banker bonuses, a controversial move that underlines the new government’s determination to introduce major post-Brexit reforms to the City of London.
(Bloomberg) — The UK is considering scrapping a cap on banker bonuses, a controversial move that underlines the new government’s determination to introduce major post-Brexit reforms to the City of London.
New Chancellor of the Exchequer Kwasi Kwarteng believes the change would make London more attractive, according to two people familiar with the matter. The discussions are still ongoing about the details, the people said, although an announcement could come as soon as next week, one of them added.
The cap, introduced by the European Union in the wake of the 2008 financial crisis, limits banker’s bonuses to two times their salary. It was thought that the UK might ditch the rules after Brexit to lure bankers to the City but fears of a public backlash against such a move have previously limited the political appetite.
The Financial Times reported the news earlier.
Former Bank of England policy maker Andrew Sentance said lifting the cap on banker bonuses would jar with efforts to rein in inflation, which touched a 40-year high of 10.1% in July.
“It sends a rather confused signal when people are being squeezed by the cost of living and the government is encouraging pay restraint,” Sentance said Thursday on BBC Radio 4’s “Today” program. “The timing would be very bad.”
The Treasury, which declined to comment to the FT, didn’t immediately respond to a request for comment.
Kwarteng said earlier this month at a meeting with industry leaders that the new government under Liz Truss will pursue sweeping financial reforms to unleash growth and competitiveness.
“The prime minister and I are committed to taking decisive action to help the British people now, while pursuing an unashamedly pro-growth agenda,” he said in a statement after the meeting.
Read More: Kwarteng Vows ‘Big Bang 2’ Reforms to Boost City of London
(Updates with details throughout.)
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