In a move branded a “disgrace” by Friends of the Earth, Chancellor George Osborne unveils tax breaks for fracking in a bid to create the “most generous” regime for shale gas in the world.

A new shale gas allowance will more than halve the tax rate for onshore shale gas production, or fracking, from 62 per cent to 30 per cent.

Mr Osborne said: “We want to create the right conditions for industry to explore and unlock that potential in a way that allows communities to share in the benefits.

“This new tax regime, which I want to make the most generous for shale in the world, will contribute to that. I want Britain to be a leader of the shale gas revolution.”

But opponents warn that the process for extracting shale gas, by hydraulic fracturing rock with high-pressure liquid to release the gas, or “fracking”, can cause earthquakes, pollute water supplies, blight the countryside and affect house prices.

I want Britain to be a leader of the shale gas revolution – George Osborne

The government also plans to give £100,000 per well to local communities affected by fracking and 1 per cent of revenues if the drilling proves to be commercially viable.

The backing from the Treasury comes after a recent report from the British Geological Survey revealed there was twice as much shale gas in the north of England as previously thought.

Other areas of the country could also be exploited for the gas. But it is still unclear how much of this shale gas could be extracted.

Ministers believe the experience of the US, which has seen a shale gas boom, shows it could boost tax revenues, create jobs, reduce energy imports – which have reached record highs in the UK – and bring down household fuel bills.

New planning guidance on shale gas is set to be published by the Communities Department as the government attempts to drive forward exploration.

‘Economic miracle’?



Questions have been raised about how much of an impact the efforts to develop home-grown shale resources will have on household energy bills.

Environmental campaigners have also warned a new “dash for gas” will undermine efforts to develop clean energy, cut emissions and create green jobs and growth.

The chancellor has had to offer the industry sweetheart tax deals just to reassure them that fracking would be profitable – Lawrence Carter, Greenpeace

Andrew Pendleton, Friends of the Earth’s head of campaigns, said: “Promising tax hand-outs to polluting energy firms that threaten our communities and environment, when everyone else is being told to tighten their belts, is a disgrace.

“Ministers should be encouraging investors to develop the nation’s huge renewable energy potential.”

Greenpeace energy campaigner Lawrence Carter said: “The chancellor is telling anyone who will listen that UK shale gas is set to be an economic miracle, yet he’s had to offer the industry sweetheart tax deals just to reassure them that fracking would be profitable.”