UK chancellor’s remit letter to BoE downgrades climate change focus

December 4, 2023|Written by |Bank of England

UK chancellor Jeremy Hunt left climate change off a list of key priorities in a remit letter to the Bank of England (BoE) governor, causing concern among UK advocacy groups.

The annual letter from the chancellor has included climate change as a priority for the past two years. The letter is a recommendation on potential UK financial risks that the BoE committee should monitor in the coming year.

This year, Hunt’s letter included recommendations to prioritise growth and competitiveness, competition and innovation, home ownership and boosting productive finance.

Climate change was referenced once in the whole letter, when Hunt told the committee that risks from climate change should be considered relevant to its primary objective. In comparison, climate was mentioned three times in 2022 and 13 times in 2021, when former chancellor Rishi Sunak updated the BoE’s mandate to include “environmental sustainability and the transition to net zero”.

While the letter didn’t remove climate change as a priority for the central bank, some advocates worry it could signal that the transition to a green economy is no longer a priority for the government.

Clarisse Murphy, central banking campaigner at research group Reclaim Finance, said it was no surprise that Hunt’s letter did not include climate change as a priority “given the government’s support for oil and gas projects in the North Sea and the BoE’s spending cuts on climate change work”. In March, the BoE reduced its spending on climate-related research to focus on core operations.

“This reflects a common misunderstanding that climate change can be treated as a second-class objective for central banks, despite climate change and fossil fuels dependency being key drivers of price and financial instability,” she said.

Ellie McLaughlin, senior policy and advocacy officer at Positive Money UK, said that while climate change remains a priority for the BoE, not adding it to the list of key concerns “may be an official signal that the Treasury no longer considers greening the financial system a priority for its own policies”.

“Rather than downgrading the climate emergency to prioritise vague notions of ‘growth’, the government should recognise that upscaling green investment is actually a key engine for economic prosperity,” she said.

Meanwhile, a report by the UK parliamentary House of Lords found that expanding the BoE’s remit to other issues such as climate change could jeopardise its independence from policymakers and harm its ability to prioritise its primary objective of price stability. The report recommended that the Treasury should “prune” the BoE’s remit to limit its focus.

This page was last updated December 4, 2023

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