SCOTTISH Labour have been challenged to “disown” the UK party’s plans not to reinstate a cap on bankers’ bonuses after it was removed by Liz Truss.

Shadow chancellor Rachel Reeves confirmed on Wednesday that Labour would not bring back the cap if it wins power, instead saying the party wants to be a “champion” of the financial services sector.

The cap was introduced in the wake of the 2008 financial crisis to limit annual payouts to twice a banker’s salary.

When Truss’s short-lived administration removed the cap, Scottish Labour group leader Anas Sarwar said: “Lifting the cap on bankers’ bonuses and a tax cut for top earners is cruel and economically nonsensical in equal measure.”

Writing in the Sunday Post, he went on: “The Tories are determined to redistribute wealth but, shamefully, from those who create it and need it to those at the top. Not only is this economically illiterate, it is morally bankrupt.”

The SNP pointed to Sarwar’s previous comments and called on him to speak out against the plans from the UK Labour leadership.

SNP MSP Kenneth Gibson said: "Labour coming out in support of Tory plans for unlimited bankers' bonuses will be a surprise to nobody – but yet again it shows how little influence their Scottish branch office has.

"Anas Sarwar said when the Tories lifted the cap on bankers' bonuses that it was ‘economically illiterate and morally bankrupt’.

"It is now essential that Anas Sarwar, and the rest of Labour in Scotland, disown Rachel Reeves' plans, call out their Westminster bosses and stand up for working families in Scotland."

Writing on social media, First Minister Humza Yousaf pointed to research from the Resolution Foundation showing “around half a million families are now affected by the benefit cap and the two-child limit on welfare support”.

The foundation added: “This number will continue to grow over time, with around 750,000 families expected to be affected by the two-child limit once the policy is fully rolled-out.”

Keir Starmer’s Labour have said they will not remove the two-child benefit cap if in power, and will instead focus on economic growth as their first priority.

Yousaf wrote: “This report should be a wake-up call for Labour. They should respond to @theSNP calls to scrap cruel Tory policies, which are pushing children into poverty.

“Instead, Labour's priority today is saying they won't cap bankers' bonuses. Labour's values aren't Scotland's values.”

Reeves’s 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, 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.”

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.

Scottish Labour have been asked for comment.