Osborne plan may pave way for Westcountry shale gas bonanza
Graeme Demianyk hears George Osborne unveil new plans aimed at heading off the UK’s looming energy crisis, plus details of a new employee-ownership scheme for smaller firms.
Chancellor George Osborne has vowed tax breaks to encourage gas drilling known as "fracking" in an effort to tackle Britain's looming energy crisis.
So-called "fracking" – or hydraulic fracturing – involves injecting high pressure water and chemicals into shale rock to blast out trapped natural gas. The technique has courted controversy after triggering earthquakes in Lancashire.
At the Tory party conference in Birmingham, Mr Osborne said the Government was consulting on a "generous new tax regime for shale" so the UK was not left behind as gas prices fell in the US, where shale gas is being widely exploited.
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A Government document has previously identified large areas of eastern and southern England as having the best potential for "shale gas" – with large deposits found in Dorset and Somerset.
Government licenses have been granted for two companies to carry out gas exploration in the Mendip Hills just south of Bath.
The South West Green Party has said Devon and Dorset "could be next" as the counties sit on underground shale gas.
Critics, though, warn the technique risks contaminating an already scarce water supply as well as causing earthquakes.
Mr Osborne said yesterday: "We are today consulting on a generous new tax regime for shale so that Britain is not left behind as gas prices tumble on the other side of the Atlantic." The Treasury said a targeted tax regime would help unlock investment in shale gas, which had the potential to create jobs and support energy security.
Mr Osborne also launched a scheme where employees are to be given the chance to take a stake in their company, in return for giving up some of their employment rights.
The voluntary scheme will be open to any limited company, but it is expected that it will be taken up mostly by smaller and medium-sized firms in fast-growing markets, as a means of recruiting a motivated and flexible workforce.
Under the scheme, employers would be able to offer "employee-owner" status to new recruits or existing members of staff.
The employee-owners would receive between £2,000 and £50,000 worth of shares, which would be exempt from capital gains tax when they are eventually sold.
In return, staff will give up rights including the ability to claim unfair dismissal after two years in a job.
The Chancellor also announced plans to cut a further £10 billion from welfare by 2016-17, on top of the £18 billion in benefit reductions already being implemented.
In his keynote speech to conference, Mr Osborne admitted that the recovery from recession is "taking longer than we hoped, because the damage was greater than we feared".
But he insisted: "We will finish the job we have started."