The UK chancellor, Kwasi Kwarteng, is reportedly planning to scrap caps on bankers’ bonuses in a controversially timed move to attract more talent to the City of London.
A source close to Kwarteng confirmed the chancellor was considering lifting the cap but they emphasised that no decision had been taken.
Ministers are known to be concerned that the City could lose out to other financial centres. The source noted that Paris is offering 30% income tax rates to attract investment banking professionals. They said the chancellor believes that UK tax revenues could be boosted if the City can attract more banking talent.
But the idea is already being widely questioned amid predictions of a backlash at a time when many families are struggling with the cost of living.
Andrew Sentance, a member of the Bank of England’s monetary policy committee during and after the financial crisis, said it was a “very bad” time to consider increasing banker’s bonuses.
Speaking on BBC Radio 4’s Today programme on Thursday, Sentance said: “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.”
He added: “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.”
Prof Susan Michie, director of the Centre for Behaviour Change and a scientific adviser to the government, tweeted: “0.3% of the British electorate voted for Truss as PM. Worth remembering when evaluating her Cabinet’s policies eg the trailed scrapping of anti-obesity measures & lifting the cap on bankers’ bonuses (which is already 2x their salaries) whilst asking others for wage restraint.”
Lionel Barber, the former editor of the Financial Times, tweeted that the move would be “politically toxic”.