George Osborne to unveil fracking tax breaks in Budget

The Coalition government last week lifted a ban on “fracking”, the controversial drilling technique that has been developed to unlock the gas from shale rock formations under the ground, reports The Telegraph.

“I would like to see us do more on shale gas and unconventional gas,” Mr Osborne told an audience in New York last night. “I see with admiration what has happened in the US in the way your shale gas revolution has made a contribution to GDP.”

The decision to give the green light to fracking has proved controversial with the Tim Yeo, the chairman of the House of Commons Energy Committee, on Tuesday arguing that the government had been “seduced” by the promise of shale gas.

The government is aggressively pursuing the policy in the hope that a new source of energy will eventually lead to lower energy bills for consumers. It was a point echoed by Sir Mervyn King, the governor of the Bank of England, in a speech in New York earlier this month.

Mr Osborne said that he will announce a tax regime designed to encourage companies to invest in drilling for shale in next March’s Budget. “We need to get the regulation right. Second, we need to get the tax regime right.”

In the US, hopes are rising that exploiting the country’s own shale deposits will lead to a renaissance in the country’s manufacturing industry as companies are drawn to the lower energy costs.

However, there remain serious environmental concerns that fracking, which involves exploding rock formations and then pumping chemicals into them to help release the gas, pollutes the environment. The ban on fracking was put in place last year after the first drilling near Lancashire caused tremors.

In a public interview hosted by the Policy Exchange and the Manhattan Institute for Policy Research in New York, Mr Osborne said that he had been unsure would the reaction would be to appointing a foreigner as the next Bank of England governor. Last month, he picked Mark Carney, the current governor of the Bank of Canada, to replace Sir Mervyn King next July.

“I didn’t know what the reaction would be that we were appointing someone who wasn’t a British citizen,” said Mr Osborne. “That was the unknown. We had a surprising lack of controversy; it says a lot about Britain.”

The chancellor reiterated that he is open to a debate about whether the Bank of England should persist with a regime that targets inflation or switch to one focusing growth or some other measure. However, he added that “we have had this inflation targetting regime since the early 1990s. There is quite a high hurdle to move from that regime.”