By Daniel Hunter

The UK government has dropped its challenge to the EU ruling on capped bonuses after the Advocate General of the EU Court of Justice yesterday (Thursday) rejected the move.

The Chancellor George Osborne said he was "not going to spend taxpayers' money on a legal challenge now unlikely to succeed".

The EU ruling means bonuses can only be twice a person's basic annual salary, or three times with shareholder approval.

The government had argued that this would make it harder for European, and more specifically UK, banks to recruit to top candidates, and that is would inflate basic pay.

George Osborne said: "The fact remains these are badly designed rules that are pushing up bankers' pay not reducing it. These rules may be legal but they are entirely self-defeating, so we need to find another way to end rewards for failure in our banks."

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