Shale Wealth Fund

Jane Ellison Excerpts

Monday 21st November 2016 Commons Chamber

[The Financial Secretary to the Treasury (Jane Ellison)]

I thank the right hon. Member for Don Valley (Caroline Flint) for bringing this debate to the House and for a typically thoughtful and constructive speech. I also thank other hon. Members who have stayed to make their contributions on this important topic.

I should say straight away that I absolutely agree that energy efficiency is one of the best ways to reduce energy bills in the long run, so we start on a note of consensus. As the right hon. Lady will know, and as I will make clear in my remarks, the fact that the consultation closed relatively recently inevitably limits a little what I can say. However, I enjoyed her speech, and I would like to make some general comments about where we are in terms of shale and the shale wealth fund.

The Government are backing the safe development of shale gas. We have over 50 years’ experience of regulating onshore oil and gas. The UK has the experience to develop our shale gas industry while at the same time ensuring the most robust and stringent protections for our environment, too.

We believe, as I sense other Members do, that shale gas is an important step forwards in a number of respects. It is a way to secure our energy supply by using our own domestic resources, as we have heard. It also brings with it the potential for tens of thousands of new jobs across various sectors, from the oil and gas industry to construction and engineering. I was very struck when I recently chaired our oil and gas forum in the Treasury just how many jobs are created in supply chains by these industries—it was one of the most striking things to come out of that discussion.

Of course, natural gas will continue to play an important role in our energy system as we move towards a low-carbon economy. We are absolutely committed to reducing our carbon emissions by at least 80% by 2050, compared with 1990 levels. Members on both sides of the House will recognise the fundamental importance of our doing so as part of the collective— indeed, global—efforts to stop climate change in its tracks. We are the first country to propose a phase-out of unabated coal, with gas and nuclear forming the secure base of our future energy mix as we continue to develop renewables and improve energy efficiency. I could not agree more that that is a really important part of the mix.

Shale will be a new, domestic source of gas, which adds to our energy security as we make the shift from coal to reduce our carbon emissions. Gas is the cleanest fossil fuel, producing half the carbon emissions of coal when it comes to generating power. Studies have shown that the carbon footprint of our shale gas would be significantly less than coal and comparable to the liquefied natural gas we import. In short, the shale gas resources beneath Britain could contribute to our security of supply, to jobs, and to increasing tax revenue, while providing a bridge to the greener future we all support.

That is why, in the previous Parliament, we put in place the right fiscal framework to make sure that the incentives are in place for investment in shale gas. It is worth reminding the House that there is an estimated potential cumulative investment in the region of £33 billion. As we explore our shale gas resources, we are also exploring how we can make the most of the benefits that the industry could bring to our economy. Specifically, we want to ensure that the communities and regions that host shale activity will benefit directly from doing so. By that, I mean that they should benefit beyond the boost to the local economy that one would expect them to receive in any case from the development of this new industry. The Prime Minister has been very clear on this. Local people must come first, not only in their involvement in the planning decisions that affect them, with all shale gas applications requiring a full consultation with local people, but in sharing the benefits with the areas in which the industry is developed, with a significant proportion of this expected in the north. That means that the shale industry could play an important role in the economic development of parts of the northern powerhouse, helping to drive local growth, investment and jobs even further.

[Graham Jones]

The autumn statement of 2015 said that the community dividend benefit of 1% is expected to rise to 10%. Are the Government going to make good, to local communities specifically, on that statement that the 1% dividend will rise significantly?

[Jane Ellison]

I am about to come on to the dividends for local communities and how we see that working through.

The shale wealth fund is a big part of how we are going to deliver these benefits for local areas. It will consist initially of up to 10% of all the tax revenues arising from shale gas production, all of which should be used for the benefit of the communities that host shale sites. I want to be clear on two points: first, this is new funding, not money used to replace any existing Government funding; and secondly, it will be in addition to any benefits provided by the shale industry itself, because, as Members know, the shale industry has independently committed to making payments to communities that host shale gas developments. The industry’s benefits scheme currently commits to providing £100,000 for each well site of hydraulic fracturing, as the right hon. Member for Don Valley said, as well as 1% of revenues from any site that enters into commercial production. The shale wealth fund is in addition to that. We estimate that it could provide up to £l billion in total and each community could receive up to £10 million. We want this money to go towards leaving a positive legacy for the future of these areas. I note that the issue of legacy was also on the right hon. Lady’s mind.

The shale wealth fund will be the latest in a line of local benefits schemes designed to support communities. For example, a number of renewable energy firms have made a voluntary commitment to provide community benefits of £5,000 per MW of installed capacity.

[Graham Jones]

The Minister says that this wealth fund is going to be available. I am Lancashire MP, so let us just talk Lancashire, where development of fracking is predominant at the moment. What discussions has she had with Lancashire County Council, Lancashire authorities, the local enterprise partnership or other interested parties about how the wealth fund may be delivered? How does she see it being delivered at a regional level in Lancashire?

--- Later in debate ---

[Jane Ellison]

I am afraid that, inevitably, it is a bit too early for me to comment in detail on that. The consultation closed only in late October, and we have had a very substantial number of responses that we want to go through very carefully. People have responded in quite some detail on exactly these sorts of issues, so we will return to this topic and it will be possible to look at them in more detail later on. Suffice it to say that we have had plenty of ideas about how this might work as we move forward, but we need to look at this carefully.

I was giving examples of other funds. The landfill communities fund is another example of statutory community benefits provision, and the Government’s coastal communities fund is also similar.

The Government have been clear that local communities should benefit directly from shale gas resources in their areas, because we are committed to delivering an economy that works for all, ensuring that the benefits of economic growth and investment are spread as widely as possible. We have also been clear, though, that local people often know best what the individual needs of their communities are. We want them not only to benefit from the fund, but to have a real say over how it operates.

That is why we have sought views from the country through our consultation on how the fund should operate and ensure tangible, lasting benefits for communities and regions that host shale activity. We asked how the shale wealth fund should be delivered, and what its priorities ought to be. As I have said, the consultation closed on 26 October. We have had an excellent response from a range of individuals and organisations—from right hon. and hon. Members, including the right hon. Lady, to charities, local businesses and community groups. We are now looking carefully at the responses, and we plan to publish our response to the consultation by the end of the year. I hope the House will therefore understand that I cannot give an indication of the responses at this early stage.

On publishing the responses, it is for respondents to consider whether to do so, but we will of course provide a list of respondents at the end of the consultation document, as we always do. I would have thought that councils and LEPs would normally make public their contributions. Given the interest in the debate, I am sure many people will decide to do that.

In answer to the right hon. Lady’s query about the purpose of the shale wealth fund, the main purpose is clear. The fund is a way of ensuring that, as this country develops our shale gas resources in a safe and sustainable way, local communities and areas that hold the resources and therefore support the industry’s development should directly benefit from doing so. As I have said, this could amount to as much as £1 billion of extra funding across these regions. We believe that local people should have a say over how best to use any such funding—for example, about whether it should be used to support new job opportunities, develop or enhance community assets, be invested in skills or be invested in green energy.

[Caroline Flint]

I understand that the submission from Lancashire County Council talks about the investment going into renewables or energy efficiency, but may I give the Minister a little word of warning? As the MP for a constituency that has been involved with the landfill fund and the aggregates tax, I know there can sometimes be a danger that only the loudest voices get heard. Quite a few local football teams get more strips than Manchester United because they are back every year putting into funds. Can we think bigger about the impact of this once-in-a-lifetime opportunity, and will she bear that in mind?

[Jane Ellison]

Of course. I take this debate very seriously, and the fact that it has essentially taken place in a consensual atmosphere makes me think that there is a possibility the House can find things on which we substantially agree about how we move forward. We need to look at the responses. I am sure there will be other contributions and thoughts about how we move forward, but we just have not had the chance to look at them yet.

The right hon. Lady has made a significant contribution to the debate this evening, and she has clearly set the ball rolling in the House’s debate on a topic to which I am sure we will return. We have consulted extensively, asking how the shale wealth fund should be delivered and what it should be spent on. I look forward to reporting on the outcome of the consultation in due course. As I have said, I feel confident in saying that we will return to debate this important subject further, and I thank the right hon. Lady for kicking off the House’s debate on this issue in the way she has this evening.

Question put and agreed to.