FCA must support government’s energy investment strategy

The Financial Conduct Authority should “take into consideration” when supporting the government’s energy security strategy, according to a letter to the regulator from the UK Treasury.

The letter, addressed to Nikhil Rathi, chief executive of the FCA, made recommendations to the regulator on aspects of the government’s economic policy, which she said the FCA should take into account.

Chancellor Rishi Sunak, who wrote the letter, said it should be read in conjunction with his letter from last year on March 23, 2021.

He explained that the letter’s recommendations are intended to supplement rather than replace the recommendations made in the 2021 letter.

Sunak wrote, “The prime minister recently set out the government’s energy security strategy. Oil and gas currently provide three-quarters of our energy, and about half of our gas demand is met by domestic supply.

“To reduce our reliance on imported fossil fuels, UK sources of oil and gas have a vital role, both in keeping our economy supplied and in supporting the transition to net zero.”

He said the government was taking a “balanced approach” and committed to increasing investment in low- and zero-carbon technologies, while supporting Britain’s hydrocarbons industry.

“Where possible and relevant, the FCA should take into account the government’s energy security strategy and the important role the financial system will play in supporting UK energy security – including through investment in transition hydrocarbons like gas – as part of the UK’s path to net zero.

Sunak also said the regulator should consider how to act in a manner consistent with its strategic objective; how to advance one or more of its operational objectives; and how to discharge its obligation to promote effective competition in the interests of consumers.

It should also take into account the importance of taking steps to minimize the extent to which a business may be used for purposes related to financial crime.

Referring to last year’s letter, Sunak said he had made a recommendation that the FCA should take into account the government’s commitment to achieve a net zero economy by 2050 when considering whether to do so. advance its objectives and discharge its duties.

He concluded: “I welcome the work the FCA has done to date on this issue, including the TCFD rules and the development of sustainability disclosure requirements.”

In its spring statement last month, Sunak scrapped the 5% VAT on green home improvements such as heat pumps and solar panels.

He said the government would reverse a ruling by the Court of Justice of the European Union which he said previously restricted the application of VAT relief on the installation of environmental and social management systems (EMS). ).

A “time-limited” zero rate for the installation of ESMs will be introduced in its place, taking effect from April 2022.

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