The EU-wide cap was imposed in 2014 to discourage the kind of profit-chasing that some critics stated triggered the monetary crash of 2008.
It restricted annual bonuses to 100 per cent of wage – or 200 per cent if shareholders accepted – to be able to give much less of an incentive for risk-taking.
However Mr Kwarteng stated its influence had by no means capped whole remuneration, as banks had merely shifted funds from bonuses to wage.
“The robust UK financial system has all the time trusted robust monetary companies sector,” he advised MPs.
“We want world banks to create jobs right here, make investments right here and pay taxes right here in London, not in Paris, not in Frankfurt, not in New York.”
However shadow chancellor Rachel Reeves stated that the transfer was a part of “a plan to reward the already rich – a return to the trickle-down of the previous”.
She added: “Larger bonuses for bankers , enormous income for power giants, shamelessly shielded by Downing Road, and all of the whereas ministers pile the crushing weight of all of those prices onto the backs of taxpayers.”
Mr Kwarteng confronted fast warnings that the removing of the cap will result in a return to the dangerous behaviour which prompted the 2008 crash.
Chartered wealth supervisor David Robinson, of London-based Wildcat Legislation, stated: “The removing of the cap on bankers’ bonuses is past irresponsible.
“Bonuses promote short-term behaviours and therefore risk-taking to generate revenue as rapidly as doable, with no implications for sustainability.
“As somebody who spent years repairing among the harm executed in 2008, it is extremely regarding that simply on the level the banks are again on a steady footing, the federal government is eradicating lots of the checks and balances put in place to maintain them there.”
Based on the roles web site Prospects, the typical beginning wage for a company funding banker is between £30,000 and £40,000.
This rises to between £50,000 and £70,000 after three years, though these with important expertise might earn a base wage of as much as £165,000.
Inside the outdated guidelines, a banker on £165,000 may in concept be given a bonus of £330,00 on prime of their base wage.
Some prime bankers, nevertheless, earn far larger salaries, with rewards on the prime working into hundreds of thousands.
Previous to the imposition of the cap, many high-fliers earnt extra from bonuses than wage.
Fred Goodwin, the previous Financial institution of Scotland chief govt, was paid £4m in 2006 – £3.8m of which got here from a bonus.
In his assertion to the Commons on Friday, which the federal government described as a “fiscal occasion”, Mr Kwarteng additionally abolished the highest charge of earnings tax for the very best earners as he spent tens of billions of kilos in a bid to drive up development to ease the price of dwelling disaster.
He scrapped the 45 per cent greater charge of earnings tax and introduced ahead the deliberate reduce to the fundamental charge to 19p within the pound a yr early to April.
And he revealed his estimate that the two-year power payments bailout will value round £60 billion over its first six months from October.
The package deal enacting Liz Truss’s tax-cutting guarantees – together with reversing the nationwide insurance coverage rise and axing the hike to company tax – got here a day after the Financial institution of England warned the UK might already be in a recession.
The Financial institution additionally lifted rates of interest to 2.25 per cent – the very best degree for 14 years and analysts anticipate an additional hike subsequent month.By terming it a “fiscal occasion” quite than a full funds, Mr Kwarteng averted the fast scrutiny and forecasts of the Workplace for Finances Accountability.
Talking after Mr Kwarteng delivered his assertion, Mel Stride, the Tory chair of the Treasury choose committee, stated he welcomed among the measures outlined by the chancellor however questioned the “huge void” on the coronary heart of the spending plans.
He urged Mr Kwarteng to publish an unbiased assertion to make sure his tax cuts have been enacted in a “fiscally accountable method”.
“Now could be the time for transparency,” he added.