Labour would not reinstate a cap on bonuses for bankers if the party wins the general election, the shadow chancellor has said.
Rachel Reeves said she instead wants to be a “champion” of the financial services sector as she bids to drive up economic growth.
The cap was introduced in the wake of the 2008 financial crisis to limit annual payouts to twice a banker’s salary.
But it was scrapped last year after a decision was made in Liz Truss’s brief spell in No 10 by her chancellor Kwasi Kwarteng.
Ms Reeves’ decision to continue allowing unlimited payouts to bankers marks another major shift in Labour’s direction, with Jeremy Corbyn having labelled the financial sector “speculators and gamblers who crashed our economy” during his leadership of the party.
In an interview with the BBC, Ms Reeves, a former Bank of England economist, 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 move comes as Labour was pledging to “unashamedly champion” the financial services sector as it seeks to win over big business in the election year.
Ms Reeves and other senior Labour figures had been vocal critics of the Tories’ decision to axe the cap during a cost-of-living crisis.
Just three months ago, the shadow chancellor criticised the move to allow unlimited bonuses to be earned again “in the midst of their cost-of-living crisis”.
“It tells you everything you need to know about this Government,” she said.
A Labour spokeswoman defended the move on Wednesday, rejecting the party had u-turned or misled the public on its stance.
“We said at the time we didn’t think it was a priority. The decision was taken by the Government and we don’t have any plans to bring it back.”
She said Labour wanted to offer businesses “stability, certainty and a clear path forward”.
The party on Wednesday published a plan it said would streamline regulations, with a promise to slim down the Financial Conduct Authority’s (FCS) handbook by cutting out “outdated and prescriptive rules”.
It follows a review, carried out by shadow City minister Tulip Siddiq, which included input and advice from top City of London figures, including former HSBC chairman Sir Douglas Flint and Barclays chairman Sir John Kingman.
In her forward to the report, Ms Reeves said Labour would be both “proudly pro-business, pro-worker” in government, with former FCA chairman Charles Randell calling it a blueprint for the “inclusive and sustainable growth of the financial sector”.
It sees the party take inspiration from Margaret Thatcher’s “Tell Sid” advertising campaign in the 1980s, most recently referenced by Chancellor Jeremy Hunt at the autumn statement, and which encouraged people to buy shares amid the privatisation of state-owned businesses.
Labour said it would “look to deliver a modern “Tell Sid” campaign for retail ownership to highlight the value of British people supporting British businesses”.
Elsewhere in the plan, Labour said it would boost the development of regional financial centres, as well as exploring the expansion of longer-term fixed-rate mortgages.
Proposals also include an ambition to make the UK a “global standard-setter” for using AI in financial services, as well as backing for securities tokenisation and a central bank digital currency.
Labour leader Sir Keir Starmer is bound to face further criticism from the party’s left.
Scottish Labour leader Anas Sarwar, who had previously accused Ms Truss of being a “Thatcher tribute act” who would rather “boost bankers’ bonuses than help those in need”, declined to criticise his party leadership over the move.
He told reporters in Westminster he stood by his previous words, but added: “You have got to look at it in the balance. We have got to inspire confidence for them to make the strategic investments, but we can’t return to a situation where they get away with it.
“I’m not here to defend bankers’ bonuses, I’m not here to defend banks. That is something the UK Treasury has got to keep an eye on.”
The SNP’s social justice spokesman David Linden accused Sir Keir of “offering no change from broken Brexit Britain”.
“By admitting he would slash funding for public services while helping the super-rich, Starmer has shown he has the wrong priorities and is on the side of the wealthy Westminster elite, not ordinary working families,” he said.