With only a few months to go before the General Election, George Osborne concentrated mainly on the oil and gas sector when talking about the energy market in his Autumn Statement. To try and win round public support for fracking, Osborne has announced two measures, firstly a sovereign-style wealth fund to benefit communities hosting shale gas projects. The fund will take a share of tax receipts paid by shale gas companies to the Government once they start production. The fund would “capture the economic benefits of shale gas for future generations” for “the north and other areas hosting shale gas developments”. And secondly a £5 million fund set aside to reassure the public about the existing regulatory regime. It is ironic that the Government has set out these schemes at the same time as earmarking £31 million for the National Environment Research Council to carry out research on the impact of shale gas drilling and fracking.
With the decline in North Sea production and falling crude oil prices, Osborne set out plans to reform the fiscal regime of the North Sea oil and gas sector. An immediate 2 per cent cut in the rate of the supplementary charge – far below the oil industry’s demand for a tax cut of 12 per cent. Yesterday in Aberdeen, Danny Alexander promised more tax breaks for the oil industry in next year’s budget which was greeted cautiously by Malcolm Webb of Oil and Gas UK who said “We are encouraged by these proposals but must now swiftly act on them given the current challenges facing the industry.”
With regard to the development of the Electricity Market Reform, the Treasury’s National Infrastructure Plan has described some of the government’s priorities. It confirmed that the government would begin negotiations with the developer of a proposed tidal lagoon in Swansea Bay to see whether it made economic sense as well as offering NuGen a UK guarantee in order to support its proposed Moorside nuclear power plant.