Watch: Tory MPs cheer chancellor Kwasi Kwarteng for removing cap on bankers' bonuses
This is the moment chancellor Kwasi Kwarteng is cheered by Tory MPs as he confirmed the government will get rid of the cap on bankers’ bonuses.
He was also heckled by opposition MPs, with Labour later accusing him of “shamelessly shielding” rich bankers as millions struggle during the cost of living crisis.
Kwarteng said the lifting of the bonus cap, one of the controversial measures announced at his "mini budget" on Friday, will drive job creation in the City of London financial district.
The cap was introduced in the wake of the 2008 financial crisis and limited annual pay-outs to twice a banker’s salary.
Kwarteng’s announcement removing it is part of the government’s wider City deregulation, with the chancellor - a former investment banker himself - telling MPs “a strong UK economy has always depended on a strong financial services sector”.
He went on: “We need global banks to create jobs here, invest here and pay taxes here - in London. Not in Paris, not in Frankfurt and not in New York. All the bonus cap did was to push up the basic salaries of bankers, or drive activity outside Europe.
“It never capped total remuneration, so let’s not sit here and pretend otherwise. So as a consequence of this we are going to get rid of it.”
Kwarteng’s announcement was met with cheers from Tory MPs including a smiling Liz Truss, who had conceded this week, when asked about the removal of the cap, not all her government's policies will be “popular”.
At the same time, he was heckled by opposition MPs sat across the House of Commons chamber.
Kwarteng added he “will set out an ambitious package of regulatory reforms later in the autumn” to “reaffirm the UK’s status as the world’s financial services centre”.
City bosses have been critical of the cap, which was introduced by EU legislation, but supporters say unfettered bonuses aided the excessive risk-taking that led to the financial crash 14 years ago.
Shadow chancellor Rachel Reeves told Kwarteng, who in his statement also axed the top income tax rate for the highest earners: “The only things that are going up are inflation, interest rates and banker bonuses.”
She added: “If you are a pensioner worried about the cost of living, a working family seeing your mortgage rate going up, a small business whose costs are spiralling, the government’s announcements today do little to reassure them.
“Bigger bonuses for bankers, huge profits for energy giants, shamelessly shielded by Downing Street, and all the while ministers pile the crushing weight of all of these costs onto the backs of taxpayers.”
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Outside Westminster, Kwarteng also received angry criticism from charities and unions. Becca Lyon, head of child poverty at Save the Children, said the chancellor had "prioritised bankers’ bonuses over helping vulnerable children through the cost of living crisis".
The Royal College of Nursing, meanwhile, described the mini budget as giving “billions to bankers and nothing to nurses... some of whom are using food banks and live on a financial knife-edge".
There are also fears of a return of a “culture of greed” in the City. Michael Barnett, a partner at Quillon Law who led litigation involving high-profile banking scandals following the 2008 crisis, said: "Bankers’ bonuses were seen as emblematic of an imploding financial services industry that was fuelled by a culture based on greed and pursuit of profit at any cost."