The cap, which was introduced by the European Union following the financial crisis, limited remuneration of select bank staff to 100 per cent of their fixed pay or 200 per cent with shareholder approval.
It came into force in 2014 and covered bonuses in the form of both cash and shares.
According to the government’s “Growth Plan” documents, the pay in bonuses “aligns the incentives of individuals with those of the bank”, which would support growth in the UK economy.
In his speech announcing his mini Budget this morning, Chancellor Kwasi Kwarteng said: “A strong UK economy has always depended on a strong financial services sector. 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.”
Earlier this week according to reports, when asked whether she was happy to see bankers get bigger bonuses prime minister Liz Truss said she was prepared to take “difficult decisions” to make Britain more competitive, attractive and bring in more investment.