Shadow chancellor Rachel Reeves will not reinstate a cap on bankers’ bonuses if a Labour government comes into power.
The removal of the cap was announced by then chancellor Kwasi Kwarteng during his short tenure as chancellor in 2022, and came into force on 31 October last year.
When the cap was in place, it imposed limits on the ratio between fixed remuneration and variable components such as bonuses.
Regulators said the cap had limited the amount of compensation employers could base on performance and risk, and banks complained that they had to increase base salaries.
Bankers’ bonus cap news
Talking to the BBC, Reeves said Labour would “unashamedly champion” the financial services sector and said the party had no intention of bringing it back if they are successful in a general election – likely towards the end of this year.
She said: “The cap on bankers’ bonuses was brought in in the aftermath of the global financial crisis and that was the right thing to do to rebuild the public finances.
“But that has gone now and we don’t have any intention of bringing that back. And as chancellor of the exchequer, I would want to be a champion of a successful and thriving financial services industry in the UK.”
The decision not to cap bonuses will likely anger unions, who described the decision to lift the cap as “obscene” when many working people were struggling with the rising cost of living.
When the cap was lifted last October, Reeves posted criticism on X that the policy “tells you everything you need to know about this Government”.
Labour leader Keir Starmer has also previously criticised the policy, claiming it amounted to a “pay rise for bankers” while key workers in the public sector were effectively facing pay cuts.
The initial cap was first introduced in 2014, aimed at preventing excessive risk-taking after the 2008 financial crisis.
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