Mr Speaker, my department and the Treasury were informed on Friday afternoon that the FSA had received allegations of manipulation of the UK gas market.
Market abuse is always wrong - but at a time when people and companies are struggling with high energy bills, the country would expect us to take firm action if these allegations prove true, and we will.
These allegations of market manipulation are being taken very seriously. We will support the regulators taking whatever steps necessary to ensure that the full force of the law is applied, if they are true, so that any guilty parties are held to account.
In the first instance, the Financial Services Authority (FSA) and Ofgem will consider these allegations. Ofgem has the lead responsibility for these physical markets, with the FSA leading on any associated financial market. Both regulators have already committed significant resources to doing so. I and my officials have been in close contact with both regulators over the weekend, and we continue to support them in their work in whatever way we can.
The assessment of the allegations is however at an early stage. The FSA and Ofgem are examining the evidence they received and as this evidence may be used in criminal and/or civil proceedings it is important not to pre-empt the work of the FSA and Ofgem, or their conclusions. At this stage, we encourage any individuals or companies to act on any concerns that they have and bring forward any evidence of market manipulation. People should know that the powers exist to protect the identity of a whistleblower, although in this instance the individual concerned has chosen to forego his anonymity.
Both Ofgem and the FSA are market regulators, independent of Government and staffed by market experts. Together with the Office of Fair Trading (OFT), these organisation have a range of powers available to them, including acting against: manipulation of financial markets; collusive activity; and abuse of strong market positions.
The Government has a strong record of providing regulators with the powers that they need to tackle market abuse. Where regulators and others have identified gaps in their powers, we have acted quickly to address them.
For example, Government acted swiftly to tackle the attempted manipulation of LIBOR and EURIBOR, by implementing in full the recommendations of the Wheatley Review, including the statutory regulation of benchmark activities. We also responded to Ofgem’s requests to extend its powers to tackle abuses that take advantage of network constraints. The Government has also undertaken a wholesale review of how competition law is applied in the UK, ensuring that it is fit for purpose, and that it can tackle collusion and abuse of strong market positions.
The UK Government has also taken a leading role in the development of the EU’s Regulation on Wholesale Energy Markets Integrity and Transparency - often referred to as REMIT. The prohibitions on insider trading and market manipulation came into force in December 2011. This will ensure that regulatory bodies across the EU are able to tackle any such abuse in wholesale energy markets. The UK was already aiming to be one of the first countries to implement REMIT in full and Government has been working with Ofgem over the past few months on the detailed implementation of these powers.
Yet if it were to prove to be the case that the existing wide ranging powers to tackle market abuse and these new REMIT powers are insufficient, I have written to the FSA, Ofgem and the OFT, asking them to identify any remaining gaps in their powers to deal with allegations of this sort.
At this early stage in the investigation it is not possible to understand what the impact on consumers, companies or markets may have been, if the allegations are proven to be true.
Yet I can assure the House of our absolute determination to clamp down on any abuse that is uncovered, wherever and by whoever.
For now, it is right and proper to allow the independent market regulators to proceed with their investigations, with our full support.
And Mr Speaker, I will commit now to update this house when we learn more.