Plan to lift banker bonus cap to go ahead

A plan to remove a cap on bankers' bonuses is one of the few mini-budget policies to remain after most measures were unwound by the new chancellor.

Jeremy Hunt made no mention of a U-turn on banker's bonuses as he reversed many of his predecessor's policies.

Kwasi Kwarteng had announced lifting the cap last month as part of a shake-up of City rules to boost the economy.

Critics argued the move benefited wealthy people at a time households were struggling with living costs.

But Mr Hunt is set to stick with the removal of the bonus cap for bankers, which is a post-Brexit shake up of City rules.

The Treasury has not responded to requests for comment from the BBC.

City bosses have long complained about the EU-wide bonus rules which cap bonuses at twice an employee's salary, arguing they lead to higher base pay that pushes up banks' fixed costs.

Those costs cannot be adjusted in line with the firm's financial performance, they add, making the UK less attractive than the US or Asia.

However, critics have argued that uncapped bonuses lead to the kind of excessive risk taking that spawned the financial crisis of 2008.

On Friday, the Trades Union Congress (TUC) said City bonuses had increased at more than twice the speed of wages since the 2008 financial crash.

The union body said its analysis found bonuses in the finance and insurance sector were now worth, on average, around £20,000 a year - their highest level on record.

"Everyone who works for a living deserves to earn a decent living, but ministers are holding down the pay of millions of key workers, while lining the pockets of City financiers," said Frances O'Grady, TUC's general secretary.

The TUC called on the government to boost the minimum wage to £15 an hour. The minimum wage, which is known officially as the National Living Wage is currently £9.50 an hour for over-23s.

Andrew Sentance, a former member of the Bank of England's rate-setting Monetary Policy Committee, has previously told the BBC that the move 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".

The Labour Party has said move to lift the cap is "bizarre" and will "do nothing to support growth".