Image copyright AP Image caption Fracking has helped contribute to a 40% cut in some US energy bills

Large-scale fracking in the UK is not likely to lead to big reductions in household gas bills, Chancellor George Osborne has said.

Extracting shale gas would boost tax receipts and aid the UK economy, Mr Osborne said.

But he played down expectations that consumers would see big reductions in prices in evidence to a Lords committee.

David Cameron has previously said it had "real potential" to cut bills.

Speaking to the House of Lords economic affairs committee, Mr Osborne said both he and the prime minister were big supporters of fracking.

But he said he did not want to suggest that the UK would see the kind of price cuts seen in the US - where prices are down by up to 40%.

'Gas prices'

He told the committee: "I think it will have an impact (on prices). I hope it will have a significant impact."

I don't want to go out there and say this is the solution to all of this country's economic problems George Osborne, Chancellor of the Exchequer Q&A: What is fracking?

But he added: "I think in the UK there are some differences with the US. We are not as closed an energy economy as the US is.

"So I think we more closely track the worldwide gas price than the US does and we have less ability to detach ourselves from the worldwide gas price."

While fracking in China and the rest of Europe could bring down the price of world gas, which would help UK consumers, there would not necessarily be a direct knock-on effect from shale gas extraction in the UK, because of the extent to which the country relied on gas pipeline connections from other countries.

"I am very pro this development and I think it does have the potential to bring gas prices down in the UK.

"I just don't want to over-promise. I don't want to go out there and say this is the solution to all of this country's economic problems."

Housing shortages

Last August, David Cameron told the Daily Telegraph newspaper that fracking had "real potential" to drive energy bills down at a time when many families were struggling with rising prices.

"Where we can relieve the pressure, we must," he said. "It's simple - gas and electric bills can go down when our home-grown energy supply goes up."

Environmental campaigners argue that fracking will do lasting damage to the landscape of the UK and will not deliver the economic benefits promised.

Mr Osborne also told peers that Britain's housing shortage was likely to last for at least another decade.

While insisting the coalition's shake-up of planning laws was having a "positive" impact, he acknowledged that more needed to be done to overcome the "historic" imbalance between supply and demand in the market.

"I don't pretend this problem is going to be solved in a few months or a couple of years," he said. "This is a big challenge for our country. We have got to build more homes."

He added: "I imagine if we were to assemble again in 10 years' time we would still be talking about the challenge of making sure that our housing supply keeps up with demand."