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THE UK government has announced fresh tax breaks for the shale gas industry along with increased support for science and engineering education in its Autumn Statement budget review.

Under the new rules, companies developing the unconventional gas will have taxes on their profits more than halved, from 62% at the moment to just 30%. They will also receive a new tax allowance equal to 75% of their capital investment in new projects.

The treasury claims that the new tax regime will be the most competitive in Europe, with an effective rate even lower than that offered to shale gas operators in the US. It says that the scheme is based upon similar tax breaks recently offered to companies developing ageing oil and gas fields in the North Sea, and will “reflect the challenging nature of these developments.”

The move has been welcomed by the UK’s budding shale industry, though some commentators have pointed out that as it is not expected that developers will turn a profit for some years, the breaks may not have a particularly heavy impact.

In a statement, however, the United Kingdom Onshore Operators Group (UKOOG) claimed that “the fact that the incentives outlined have an impact only when the industry starts making profits is a vital signal to the sector and potential investors that the UK is serious about onshore oil and gas extraction.”

“Today’s announcement of a new onshore oil and gas regime is as much about tomorrow as today,” says UKOOG CEO Ken Cronin.

“To build a strong industry which can contribute to the UK economy, the country needs the correct framework for operators, and that includes a clear signal that an appropriate and fair tax regime is in place that will incentivise the long-term nature of investments.”

The raft of new measures put forward by Chancellor George Osborne also featured fresh vows to back the country’s new fleet of nuclear reactors as part of a National Infrastructure Plan. This includes backing for a partnership between Horizon and Japan’s Hitachi, who are looking to build a new plant at Wylfa.

“The country that was the first to extract oil and gas from deep under the sea should not turn its back on new sources of energy like shale gas because it’s all too difficult,” said Osborne, when presenting his statement to parliament.

“And the country with the world’s first civil nuclear programme shouldn’t be a country that says we can do this no longer.”

Osborne also announced a series of measures aimed at raising the state of UK education, including plans to provide universities across the country with an extra £50m/y (US$???/y) for funding science, technology engineering and maths (STEM) courses. The government will also spend £40m to support an extra 20,000 apprenticeships over the next two academic years.

Declaring science as “a personal priority of mine,” the UK chancellor added that the country’s science capital funding budget for the coming years is also to be increased by £500m.

By this time next year, he also pledged that the government will produce a central science and innovation strategy. The treasury claims that this “will be a roadmap of how the government’s long-term commitment on science capital […] will deliver the research and innovation infrastructure needed to ensure that the UK’s capabilities remain world-leading.”

The Autumn Statement’s increased support for STEM education has been welcomed by IChemE, which calls it “another positive step in the right direction.” CEO David Brown notes, however, that “£90m is a small investment when measured against the scale of the task.”

He explains that it is “estimated that the UK will need around 87,000 graduate-level engineers per year over the next ten years”, adding that in 2013 we only expect to produce around 50,000.

“In addition we have a major shortfall in the 69,000 apprenticeships needed by industry each year,” Brown continues. “Today’s announcement should only be the start of a long-term commitment to invest in science, technology, engineering and maths.”

The Chemical Industries Association, meanwhile, has criticised the chancellor’s statement for failing to offer support for green energy initiatives. The group’s CEO, Steve Elliot, says: “In particular, we need to see the promised rebates from the range of climate policies impacting on our power prices made broader and deeper and in a way that provides better long-term business certainty for investment.”

On a more welcoming note, he adds that “as a major user of gas as a raw material as well as a fuel, I am pleased the chancellor has confirmed a competitive tax regime for shale gas.

“This is another step towards realising secure and competitive supplies and the economic benefits from investment in the UK.”