FSA increases budget by 10.1% and earmarks £50m to support staff in the move to more principles-based regulation.

The FSA's budget for 2007/08 has increased by 10.1%.

The regulator's board has earmarked £50m over the next three years to improve the effectiveness of FSA staff and support the move to more principles-based regulation (MPBR).

The cost will be amortised in terms of firms' fees over a period of 10 years.

There will also be a £7.4m increase in spending on financial capability, taking the total expenditure in 2007/8 to £17.1m and an up-front £11.3m spend on IT operations which forms part of a multi-year, cost-efficient outsourcing agreement.

Outgoing FSA chief executive John Tiner said: "More principles-based regulation will produce significant benefits for firms, markets and consumers but we need to invest in our people and information systems to realise this change. This will result in an FSA that is better equipped to face future challenges and to deliver better outcomes for all our stakeholders.

"In the year ahead we are also placing increased emphasis on, and investment in, our National Strategy for Financial Capability. Lack of financial understanding among consumers has been recognised as a priority risk by the FSA and the need for more confident, capable consumers who can take advantage of a more dynamic market place has never been greater. We have set out our targets: we need this additional investment to achieve them."

The FSA's Business Plan details the main priorities for wholesale for 2007/8 are on implementing and influencing EU legislation, such as MiFID and Solvency 2, and increasing focus on the prevention, detection and prosecution of market abuse and other forms of financial crime. The FSA's retail work centres on making the market more effective and the main priorities will continue to be Treating Customers Fairly (TCF), Financial Capability, the review of retail distribution and payment protection insurance.

New initiatives are limited and include work on the impact of climate change on the financial services markets, an assessment of how older consumers are served by the financial services market and a review of the risks within the commodities markets.

Tiner added: "Those who pay our fees will benefit from having a regulatory system which focuses increasingly on achieving desired outcomes and from dealing with a more efficient, more responsive, better-focused organisation. Consumers will benefit from firms being more attuned to their needs and will receive appropriate information, while the financially excluded will benefit from a more active programme to increase their understanding of financial matters."