Chancellor Kwasi Kwarteng has come under fire for considering scrapping the cap on bankers’ bonuses, as millions struggle during the cost-of-living crisis.

Unions and economists were among those criticising the timing of the proposal to remove the cap, introduced in the wake of the 2008 financial crisis, that limits annual pay-outs to twice a banker’s salary.

Sources close to Mr Kwarteng said no final decisions had been made, but suggested such a move as part of a wider post-Brexit overhaul of City regulations would make London a more attractive place for global banks.

The TUC federation of trade unions said Mr Kwarteng should focus on raising everyone’s wages rather than “boosting bumper bonuses for those at the top”.

Liz Truss’s Chancellor has promised a growth-focused shake-up of the economy and told City bosses last week: “We need to be decisive and do things differently.”

But considering allowing bankers’ bonuses to soar as millions feel the strain of the cost-of-living crisis was proving controversial.

TUC general secretary Frances O’Grady said: “Bonuses in the City are already at a record high.

“While City executives rake it in, millions are struggling to keep their heads above water.

“Working people are being walloped by soaring prices after the longest and harshest wage squeeze in modern history.

“The Chancellor’s number one priority should be getting wages rising for everyone – not boosting bumper bonuses for those at the top.”

City bosses have been critical of the cap introduced by European Union legislation, but supporters say unfettered bonuses aided the excessive risk-taking that led to the financial crash.

Economist Andrew Sentance, who was a member of the Bank of England’s Monetary Policy Committee during and after the financial crisis, criticised the timing of the plans.

“It sends a rather confused signal when people are being squeezed in terms of the cost of living and the Government is trying to encourage pay restraint in the public sector,” he told BBC Radio 4’s Today programme.

“So to appear to allow bankers to have bigger bonuses at the same time doesn’t look very well timed.

“There may be some longer-term arguments for pursuing this policy, but I think the timing would be very bad if they did it now.”

We know that bonuses in the financial services sector have helped the richest 1% of the population to capture an increasing share of total UK incomes

Luke Hildyard, the executive director of the High Pay Centre think tank, said removing the cap would be an “ideological measure” that favours the rich.

“The bonus cap has probably helped to contain bankers’ pay awards but they’ve still reached record highs this year while the rest of the country has undergone an epic cost-of-living crisis and profound economic hardship,” he added.

“We know that bonuses in the financial services sector have helped the richest 1% of the population to capture an increasing share of total UK incomes.

It’s rank hypocrisy. There is no doubt whose side this Government is on

“Removing the cap would be a pro-rich ideological measure that sends a depressing message about who policymakers listen to and think about when making economic policy.”

Gary Smith, the general secretary of the GMB union, told the PA news agency: “Apparently frontline workers asking for a pay rise risks increasing inflation, while allowing fat cat bankers to trouser monstrous bonuses ‘attracts talent’ and ‘boosts the city’.

“It’s rank hypocrisy. There is no doubt whose side this Government is on.”

Lifting the cap would also come at a time when the Government is refusing Labour’s demands for the multibillion pound strategy to help families and businesses through the energy crisis to be paid for by a windfall tax on the soaring profits of gas and oil giants.

While prime minister, Boris Johnson was forced to say he was not planning to lift the cap, as he faced a political backlash for reportedly considering the move in June.

Labour leader Sir Keir Starmer accused him of plotting “pay rises for City bankers, pay cuts for district nurses”.

Next week Mr Kwarteng is expected to announce a mini-budget to help the country as it faces soaring bills stemming from Russian President Vladimir Putin’s invasion of Ukraine.

But it was unclear whether an announcement on bankers’ pay would come in that “fiscal event” or as part of a wider package later on.