Critics say that scrapping the cap on bankers’ bonus will encourage a return to excessive risk taking. It will provoke retaliation from the European Union, they warn. And perhaps, worst of all, it could prove fatal politically, rewarding a few rich Tory friends while the rest of the country struggles with the cost-of-living crisis. Chancellor Kwasi Kwarteng will get lots of criticism if, as predicted, he does decide to bin the cap in his upcoming financial statement. Even so, he should ignore the naysayers.

It will certainly be a controversial move. The controls on City bonuses were imposed right across the EU in the wake of the crash of 2008/2009. These rules limit the amount that traders and bankers can earn in relation to their basic salaries. Behind it was the idea that bonuses had created a culture of excessive risk-taking that led to the crash. In fairness, there was an element of truth in that suggestion, even if it was hard not to suspect there was also an element of envy involved as well. But whatever the merits of that decision, the cap has long since outlived its purpose. Here’s why.

First, it is hardly relevant any more. If anything the banks have become too cautious, and reluctant to invest, and they have such strict solvency and stress tests that it is unlikely they will return to the wild bets on housing or any other asset. All the cap does is make it harder for them to reward real talent.

Next, allowing better bonuses will vastly improve the competitiveness of the City. The EU will keep its cap in place, and that will make London an even more attractive place to base a financial institution than it already is. Sure, the EU may try to come up with some form of retaliation. We will no doubt hear speeches in the European Parliament about how Europe can’t be put at risk by London’s Wild West bankers. But the EU has been busily trying to destroy the City for six years now without much success, and, short of full scale capital controls, will find there is not much that can be done about it.

Finally, the politics probably don’t matter very much. It is unlikely that most people will notice. Even better, it will send out a signal that Liz Truss’s government is ready to make the right decisions for the economy, and won’t simply give in to every populist demand. It will demonstrate that the new PM is more interested in wealth creation than redistribution.

In reality, a bonus cap was always a very odd piece of legislation. We don’t cap wages in any other sector of the economy. There is no reason why we should cap them in the City either.