Fracking gets the green light from the coalition

Energy Secretary Ed Davey says drilling for shale gas can resume subject to controls "to mitigate the risks of seismic activity".

Energy Secretary Ed Davey has just given the go-ahead for fracking, the technique used to extract shale gas, to resume in the UK, subject to controls "to mitigate the risks of seismic activity". Exploration was previously halted after test-drilling by the company Cuadrilla caused two minor earthquakes in Lancashire.

Davey said: "Shale gas represents a promising new potential energy resource for the UK. It could contribute significantly to our energy security, reducing our reliance on imported gas, as we move to a low-carbon economy. My decision is based on the evidence. It comes after detailed study of the latest scientific research available and advice from leading experts in the field."

However, he cautioned that "We are still in the very early stages of shale gas exploration in the UK and it is likely to develop slowly. It is essential that its development should not come at the expense of local communities or the environment. Fracking must be safe and the public must be confident that it is safe."

New controls to limit seismic risk include:

  • A prior review before fracking begins must be carried out to assess seismic risk and the existence of faults;
  • A fracking plan must be submitted to DECC showing how seismic risks will be addressed;
  • Seismic monitoring must be carried out before, during and after fracking;
  •  A new traffic light system to categorise seismic activity and direct appropriate responses. A trigger mechanism will stop fracking operations in certain conditions.

In addition, Davey announced that he was commissioning a study of the possible effects of shale gas development on greenhouse gas emissions and climate change, although green campaigners are questioning why this was not held before the latest annoucement.

Greenpeace's energy campaigner Leila Deen said: "George Osborne's dream of building Dallas in Lancashire is dangerous fantasy. He is not JR Ewing and this is not the US. Energy analysts agree the UK cannot replicate the American experience of fracking, and that shale gas will do little or nothing to lower bills. Pinning the UK's energy hopes on an unsubstantiated, polluting fuel is a massive gamble and consumers and the climate will end up paying the price."

It became clear that ministers were preparing to give fracking the green light after George Osborne's Autumn Statement promised tax incentives for shale gas industry and announced the establishment of the "Office for Unconventional Gas".

Labour has said that fracking should only go ahead "if it is shown to be safe and environmentally sound" and that it will "look carefully" at the government's proposals. Shadow energy secretary Caroline Flint added: "The idea that this form of gas extraction can have the same impact here in the UK as it has had on gas prices in the United States is considered wishful thinking by most experts."

We'll have more response to the announcement later on The Staggers.

General views of the Cuadrilla shale fracking facility in Preston, Lancashire. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty Images
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There are risks as well as opportunities ahead for George Osborne

The Chancellor is in a tight spot, but expect his political wiles to be on full display, says Spencer Thompson.

The most significant fiscal event of this parliament will take place in late November, when the Chancellor presents the spending review setting out his plans for funding government departments over the next four years. This week, across Whitehall and up and down the country, ministers, lobbyists, advocacy groups and town halls are busily finalising their pitches ahead of Friday’s deadline for submissions to the review

It is difficult to overstate the challenge faced by the Chancellor. Under his current spending forecast and planned protections for the NHS, schools, defence and international aid spending, other areas of government will need to be cut by 16.4 per cent in real terms between 2015/16 and 2019/20. Focusing on services spending outside of protected areas, the cumulative cut will reach 26.5 per cent. Despite this, the Chancellor nonetheless has significant room for manoeuvre.

Firstly, under plans unveiled at the budget, the government intends to expand capital investment significantly in both 2018-19 and 2019-20. Over the last parliament capital spending was cut by around a quarter, but between now and 2019-20 it will grow by almost 20 per cent. How this growth in spending should be distributed across departments and between investment projects should be at the heart of the spending review.

In a paper published on Monday, we highlighted three urgent priorities for any additional capital spending: re-balancing transport investment away from London and the greater South East towards the North of England, a £2bn per year boost in public spending on housebuilding, and £1bn of extra investment per year in energy efficiency improvements for fuel-poor households.

Secondly, despite the tough fiscal environment, the Chancellor has the scope to fund a range of areas of policy in dire need of extra resources. These include social care, where rising costs at a time of falling resources are set to generate a severe funding squeeze for local government, 16-19 education, where many 6th-form and FE colleges are at risk of great financial difficulty, and funding a guaranteed paid job for young people in long-term unemployment. Our paper suggests a range of options for how to put these and other areas of policy on a sustainable funding footing.

There is a political angle to this as well. The Conservatives are keen to be seen as a party representing all working people, as shown by the "blue-collar Conservatism" agenda. In addition, the spending review offers the Conservative party the opportunity to return to ‘Compassionate Conservatism’ as a going concern.  If they are truly serious about being seen in this light, this should be reflected in a social investment agenda pursued through the spending review that promotes employment and secures a future for public services outside the NHS and schools.

This will come at a cost, however. In our paper, we show how the Chancellor could fund our package of proposed policies without increasing the pain on other areas of government, while remaining consistent with the government’s fiscal rules that require him to reach a surplus on overall government borrowing by 2019-20. We do not agree that the Government needs to reach a surplus in that year. But given this target wont be scrapped ahead of the spending review, we suggest that he should target a slightly lower surplus in 2019/20 of £7bn, with the deficit the year before being £2bn higher. In addition, we propose several revenue-raising measures in line with recent government tax policy that together would unlock an additional £5bn of resource for government departments.

Make no mistake, this will be a tough settlement for government departments and for public services. But the Chancellor does have a range of options open as he plans the upcoming spending review. Expect his reputation as a highly political Chancellor to be on full display.

Spencer Thompson is economic analyst at IPPR