Last updated: December 3, 2012 10:35 pm

Chancellor backs gas to fire up Britain

Chancellor George Osborne is to approve up to 30 gas-fired power stations as part of an Autumn Statement intended to boost private sector infrastructure investment and underpin long-term growth.

Mr Osborne will also announce a relaunch of the discredited private finance initiative to lure private investors into building schools, hospitals and other public projects; new rules are intended to improve transparency and risk sharing and remove excess profits.


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The dramatic expansion of gas – seen by many Tory MPs as a source of cheap future energy – will be backed by possible tax breaks and a new regulatory regime for shale gas exploration. Environmentalists who want more emphasis on greener power are likely to be dismayed.

Government guarantees will also be rolled out to cover other infrastructure projects, in an attempt by the chancellor to prove to his Labour critics that he has a plan to get Britain’s stagnant economy moving.

Mr Osborne’s publication of a gas strategy fills in the gaps in the government’s energy plan. The chancellor believes the country will need up to 30 new gas-fired power stations to produce 26 gigawatts, replacing old coal, nuclear and gas plants.

The strategy will say that “in 2030, we could need more overall gas capacity than we have today”. Under one scenario – if Britain’s carbon reduction plan in the mid 2020s is reined back – there could be 37GW of new gas plants in the UK by 2030, accounting for half of the UK’s generation capacity.

Mr Osborne will also consult on tax breaks for shale gas exploration and set up an Office for Unconventional Gas to simplify regulation and arbitrate in disputes between the industry and opponents of the “fracking” extraction system.

The chancellor’s financial package will be fiscally neutral meaning that money raised from a squeeze on benefits and pension tax relief for the wealthy can be redirected to priority areas. They include measures to promote growth – moves to lift housing and job creation are likely – and support for middle Britain, including a freeze on fuel duty increases.

But that is unlikely to distract from bad economic forecasts showing slower growth and higher deficits than expected in March.

In the event of the government missing its target to see public debt fall as a share of national income in 2015-16, those close to Mr Osborne have been considering keeping the target in place even if the Office for Budget Responsibility says there is a less than 50 per cent chance of meeting the rule.

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