By Richard Johnstone | 13 January 2014
Local authorities will retain all of the business rates raised from local shale gas developments, Prime Minister David Cameron announced today as part of the government’s drive to go ‘all out’ to promote fracking.
Currently, councils would receive 50% of the business rates from shale gas developments under the government’s part localisation of the tax to town halls.
But Cameron announced today that the full increase in revenue would now be given to authorities. This could be worth as much as £1.7m a year for a typical site.
Today’s announcement is in addition to the energy industry’s plan to give local people £100,000 when a test for shale gas is undertaken, and a further 1% of revenues if shale gas is discovered. This could be worth £5m to £10m for a typical productive site over its lifetime.
Cameron said that shale gas, which is released through fracking – injecting water, sand and chemicals underground at high pressure into shale rock – formed ‘a key part of our long-term economic plan to secure Britain’s future is to back businesses with better infrastructure’.
He added: ‘That’s why we’re going all out for shale. It will mean more jobs and opportunities for people, and economic security for our country.’
Cameron insisted the government had already taken action to back the controversial process, including lower taxes for the emerging industry, which were announced at last year’s Autumn Statement. Regulation of exploration activity has also been streamlined, with new a single application form for permits, he added.
Responding to the announcement, the Local Government Association said the community benefits package should be further strengthened to compensate the communities most affected by fracking.
Environment and housing board chair Mike Jones said Cameron’s announcement was a step in the right direction, but he called for more of the revenues from shale sites should be awarded to communities
‘Given the significant tax breaks being proposed to drive forward the development of shale gas and the impact drilling will have on local communities, these areas should not be short-changed by fracking schemes,’ he said.
‘One per cent of gross revenues distributed locally is not good enough – returns should be more in line with payments across the rest of the world and be set at between 5% and 10%.
‘The community benefits of fracking should be enshrined in law, so companies cannot withdraw them to the detriment of local people. The LGA is encouraging the development of models which will ensure the money would go into a charitable sovereign fund for community purposes and used to support local priorities.’
