Chancellor Kwasi Kwarteng has removed the cap on bankers’ bonuses.

Making his mini-budget announcement in the House of Commons, the Chancellor said the UK economy was dependent on a “strong financial services sector”.

He confirmed the UK Government would be scrapping rules which cap bankers’ bonuses.

The cap was introduced across the EU in 2014 after the global financial crisis.

It limited the amount a banker could be paid in bonuses, capping it at twice their annual salary unless shareholders agree.

 

As Mr Kwarteng announced he was lifting the cap he was heckled by Labour MPs, while he received cheers from his own backbenchers.

Speaking to the Commons, the new Chancellor said: “A strong UK economy has always depended on a strong financial services sector.

“We need global banks to create jobs here, invest in London, and pay taxes in London, not Paris, not Frankfurt, not 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 we’re going to get rid of it.

“And to reaffirm the UK’s status as the world’s financial services centre, I will set out an ambitious package of regulatory reforms later in the autumn.”

Critics of the cap said it made the UK a less attractive option for the financial sector and pushed businesses to the US or Asia.

While supporters of the cap warned uncapped bonuses lead bankers to take excessive risk, linking them to the 2008 financial crisis.