Today’s Autumn Budget statement contains a number of measures which could impact on the UK water sector, including an overhaul of the planning infra regime, increased tax relief for shale gas, easier access to funding and moves to tackle tax avoidance by large corporation.

One of the key measures includes the introduction of a new tax relief for shale gas.

The Chancellor announced a new tax allowance to kick start the exploitation of onshore oil and gas (including shale gas) in the UK, referring to the economic benefits that shale gas could bring – thousands of jobs, billions of pounds of business investment, and lower energy bills – which would extend beyond oil and gas to other manufacturing sectors,.

The new tax allowance will reduce the tax rate on a portion of a company’s profits from 62% to 30%, with companies receiving an allowance equal to 75% of their capital spend on projects.

The Statement says that independent analysis shows that the allowance makes the UK tax regime for shale gas the most competitive in Europe. The evidence collected from operators also indicates that the allowance makes the effective tax rate for shale gas projects lower than in the US – making the UK an attractive, competitive opportunity for global operators.

TheSstatement says that in addition to putting the right tax regime in place to encourage business investment, the government is committed to ensuring local communities benefit from shale gas projects and to streamlining the regulatory framework. Local communities are already guaranteed to receive £100,000 for every fracked well site during the exploration phase and at least 1% of revenue – up to as much as £10 million over the lifetime of a project – during production.

The Statement also reiterates the commitment in the new National Infrastructure Plan 2013 to improve the UK’s infrastructure , referring to the NIP’s proposals for further reforms to speed up the delivery of public and private infrastructure, including:

• the introduction of a specialist Planning Court to tackle delays to infrastructuredelivery and reduce the impact of meritless claims raised through the Judicial Review process
• an overarching review of the Nationally Significant Infrastructure Planning Regime, focused on improving the pre-application phase and further streamlining of consenting, and
• a freeze in planning fees for the Major Infrastructure Regime until at least the end of this Parliament

Access to finance for SMEs

The Statement also includes measures to improve access to finance for SMEs via the launch of the British Business Bank, which is drawing together existing government initiatives under one roof. The Bank has already begun to deploy £1 billion of additional capital to address gaps in the supply of finance to SMEs.

The Statement says the government will use unspent funding from the Business Finance Partnership to provide a further £250 million for the British Business Bank’s new schemes. Together with its existing budget, this would enable the British Business Bank to:

• invest in late stage venture capital funds which in turn invest in high growth potential SMEs
• launch an innovative new scheme to support the provision of lease and asset finance
• launch a programme of wholesale guarantees for SME loans – which will incentivise lending to SMEs by reducing the capital lenders must hold, and enable the Business Bank to achieve significant leverage

Treasury to conduct new study on economic regulators, including Ofwat

The Statement also refers to a new study on the economic regulators, focusing on how they could work together to improve the regulatory outcome for consumers and the economy as a whole. The study will consider how to develop better joint working, more clearly explain the role of economic regulation, and facilitate cross sector infrastructure investment. The work will be led by HM Treasury and BIS, with support from the economic regulators and their sponsor departments, and will report in spring 2014

Tackling tax avoidance by large business

The Chancellor also announced government action to tackle tax avoidance by large business, including moves to:

• close down an existing corporation tax avoidance scheme exploiting the use of intra-group derivatives
• make changes to the Controlled Foreign Company (CFC) rules to prevent their abuse by addressing UK base erosion through the transfer of profits from intra‑group lending offshore
• prevent offshore contractors who lease equipment to oil and gas operators from using associate companies in tax havens to minimise their UK tax bill
• improve the effectiveness of the worldwide debt cap rules by further limiting the ability of multinational groups to abuse them through allocating excessive debt toUK companies

The statement says the government is also taking decisive action to ensure that domestic defences of the UK’s competitive tax system are robust by tackling a number of schemes or arrangements being used by some companies to reduce their corporation tax liability in the UK.