Kwasi Kwarteng mulls move to lift cap on bankers’ bonuses to lure talent to City

Chancellor Kwasi Kwarteng is considering a controversial move to scrap caps on bankers’ bonuses as part of a drive to boost London’s competitiveness as a financial capital. 

Prime Minister Liz Truss has promised to ‘really unshackle’ the City of London post-Brexit. 

The banker bonus cap was adopted as an EU law in the wake of the financial crisis. 

Truss and Chancellor Kwasi Kwarteng are expected to unveil a package including tax cuts in the days after the Queen’s state funeral on Monday September 19. 

‘Fiscal event’ due this month

The Prime Minister’s spokesman said, ‘We are still planning to deliver a fiscal event this month.’

The idea of lifting the cap on bankers’ bonuses would be to lure top global bankers back to the City of London, the Financial Times reported. 

Kwarteng told City executives last week, “We need to be decisive and do things differently.”

Interest rate rise due?

Andrew Sentance, a member of the Bank of England’s monetary policy committee during the financial crisis told BBC Radio 4’s Today programme,  “It sends a rather confused signal when people are being squeezed in terms of the cost of living and the government is trying to encourage pay restraint in the public sector.

“To appear to allow bankers to have bigger bonuses at the same time, doesn’t look very well timed. There may be some longer-term arguments for pursuing this policy, but I think the timing would be very bad if they did it now.”

Truss has already unveiled a £150 billion support package for households and businesses, with energy bills for households capped at £2,500 from October for two years.

Britain’s GDP grew by just 0.2% in July, according to figures from the Office for National Statistics (ONS), and grew annually by 2.3%. 

The Bank of England’s Monetary Policy Committee was due to have its next interest rate meeting on September 15, but this has been pushed back by a week due to the death of Queen Elizabeth.