In what was effectively his third budget of the year, the Chancellor George Osborne stated: “going green should not cost the earth,” and with this, announced that the Department of Energy and Climate Change’s (DECC) budget was to be cut by 22 per cent across the next four years.
The speech, made up of an Autumn Statement and a Spending Review, encompassed a raft of measures for the energy sector. It included a commitment to shale gas and nuclear power alongside a promise to double support for low carbon electricity and renewables. However, the UK’s oil and gas industry found little support from the Chancellor.
Osborne confirmed that he will commit up to 10 per cent of shale gas tax revenues to a Shale Wealth Fund, which could deliver up to £1 billion of investment in local communities. Following the Energy Secretary Amber Rudd’s statement last week that she was looking to shift the UK’s reliance on coal to gas, support for fracking comes as no surprise.
At least £250 million will be invested in a nuclear research and development programme designed to revive the UK’s nuclear expertise over the next five years . This investment will form part of Osborne’s plan to create a “Northern Powerhouse” with the investment targeted towards South Yorkshire and the North West.
Included within the speech were forecasts from the Office of Budget Responsibility which indicated that tax revenues from North Sea oil were forecast to fall by 94 per cent. They also stated that between 2020 and 2040, net tax revenue from North Sea oil would be close to zero. Amidst these forecasts, Osborne chose not to provide additional support for the oil and gas industry in the form of further tax breaks.
There was also confusion over the Government’s approach to climate change with the previously ring-fenced £1 billion for carbon capture and storage technology no longer available. With the Paris climate change talks starting this week, details of the cut in funding were not included in the Chancellor’s speech. The information was released shortly after via a two-line letter to the London Stock Exchange.