Rishi Sunak is pushing Liz Truss's plan to scrap the cap on bankers' bonuses despite warnings that boosting payouts for the rich is “obscene”.
Abolishing the cap on multi-million pound bonuses for high earners is one of the only policies to survive last autumn's disastrous ‘Trussonomics' period.
Mr Sunak endorsed his predecessor's policy to get rid of post-Brexit rules on capping bonuses – inherited from the EU when the UK was still a member.
It comes about a year after former chancellor Kwasi Kwarteng first revealed plans to change bonus rules as part of the mini-budget fiasco that sparked market panic.
Even Boris Johnson reportedly backed away from taking the plunge because he feared a huge political backlash during the cost of living crisis.
On Tuesday, the Financial Conduct Authority (FCA) and the Bank of England's Prudential Regulation 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 center fend off post-Brexit rivals – was immediately condemned by unions as an “insult to workers”.
TUC general secretary Paul Nowak said it was an “obscene decision”, adding: “City funders are already enjoying bumper bonuses. They don't need another helping hand from the Conservatives.”
“At a time when millions up and down the country are struggling to make ends meet – this is an insult to working people,” the TUC boss said. “Rishi Sunak has shown once again that he is more interested in nesting the super rich than helping struggling families.”
Labor leader Sir Keir Starmer had previously attacked the plan as amounting to “pay rises for bankers, pay cuts for district nurses”.
The cap – introduced despite UK opposition from the EU in 2014 in the wake of the banking crisis – requires bonuses to be capped at no more than 100 per cent of fixed pay, or twice that with shareholder approval.
The cap is believed to have upset US investment banks that employ tens of thousands of staff in London because Wall Street typically offers lower fixed salaries with large performance-related bonuses.
The FCA and PRA said on Tuesday that removing the cap would allow for “judicious risk-taking” in a bid to boost competitiveness in the City.
A spokesman said: “Removing the bonus cap gives companies the freedom to restructure their pay over time, under the regulators' rules on variable pay which aim to better align pay with prudent risk-taking ».
Avoiding responsibility for the move, a Treasury spokesman said: “Decisions about renumbering in the banking sector rest with the PRA as an independent statutory regulator.”
Criticizing the move, financial commentator Paul Lewis said: “Obviously bankers only work at their best if they are paid more than three times their actual salary.”
Tax campaigner Richard Murphy also attacked the changes on Twitter / X. “As if evidence were needed that the UK Tories are run for the benefit of the bankers,” he said.