Spending Review: Osborne's green energy support boosts job prospects in Yorkshire

Spending review in full

The coalition Government has confirmed it will honour Labour's previous plans to part-fund the construction of several large-scale carbon capture and storage (CCS) schemes around the country, and also provide significant funding for developing the offshore wind industry by upgrading East Coast ports.

The announcement could be hugely significant for Yorkshire, with tens of thousands of new jobs potentially riding on the success of schemes such as the planned 'clean-coal' CCS power plant at Hatfield, near Doncaster, and the proposed wind turbine construction parks on the banks of the River Humber.

Fears had lingered throughout the summer that both the CCS and port infrastructure funding competitions could be scrapped in the spending review.

But Chancellor George Osborne yesterday confirmed he will provide 1bn in funding for the country's first CCS scheme, and a further 200m toward developing the offshore wind industry.

He also pledged a further 1bn for a new green investment bank to help fund green infrastructure projects, and 850m for a fund to reward people and businesses who heat their homes and premises in new environmentally-friendly ways.

Liberal Democrat Energy Secretary Chris Huhne said: "We have taken some tough decisions, but remain on course to be the greenest Government ever. We will help create green jobs and green growth, and secure the low-carbon investment we need to keep the lights on."

CCS is an emerging technology through which harmful carbon emissions are captured from power stations and large factories before they are released into the atmosphere and stored safely underground. The industry has huge potential for growth in Yorkshire, due to the region's large number of heavy polluters and close proximity to depleted oil and gas fields in the North Sea, where CO2 could be stored.

The first CCS scheme to receive funding looks almost certain to be Scottish Power's Longannet plant, near Alloa, however, after a rival bid at Kingsnorth, Kent, was withdrawn hours before the spending review was unveiled.

But Ministers confirmed last night there will be competitions for four further CCS schemes in the future, with a consultation to be launched next month on how they will be funded. Powerfuel plc's proposed 900mw clean-coal plant at Hatfield will be confident of success, having already won a similar funding competition at European level last year.

CO2Sense Yorkshire, the green business development programme funded by Yorkshire Forward, has said it ultimately hopes schemes in Yorkshire will win two of the four competitions.

Chief executive Joanne Pollard said: "The headlines look like good news for the environment – we welcome the continued commitment to developing CCS technology. But it's essential funds are allocated to the right projects."

Further details of how the 200m offshore wind money is to be used will be released next week, but the fund is almost certain to support a 60m port infrastructure competition designed to upgrade East Coast ports and so attract major turbine manufacturers to Britain.

More cuts may have to be made, warn experts

REACTION

Jonathan Reed Political Editor

THE deep cuts to spending will hit the quantity and quality of public services, experts warned last night as unions protested amid the threat of major job losses.

The respected Institute for Fiscal Studies (IFS) said that the measures represented the deepest cuts since the 1970s, but warned that it was still "quite possible" that the Chancellor would have to make further spending cuts or put tax in order to meet his target for tackling the deficit.

"The deep cuts to spending announced in the spending review will reduce the quantity and quality of some public services," said acting director Carl Emmerson. "Should this deterioration prove too great for the Government's liking then the Chancellor might wish to top up his spending plans."

In a speech lasting more than an hour, George Osborne said that he had acted to restore "sanity to our public finances" and deal "decisively" with Britain's record peacetime deficit – and sought to embarrass Labour by revealing the average 19 per cent budget cuts was lower than the 20 per cent Labour had planned.

But in his first set-piece occasion as Shadow Chancellor, Alan Johnson said that the Government's "rush" to cut the deficit was a "recipe for unemployment".

"Today's reckless gamble with people's livelihoods runs the risk of stifling the fragile recovery," said the Hull West and Hessle MP. "We believe we can and should sustain a more gradual reduction, securing growth."

Labour attacked the Spending Review as unfair – hitting families and women the hardest – saying the "squeezed middle" would pay twice as much as the banks, promises on the NHS had been broken and police funding meant taking risks with crime and public safety.

In a letter to activists, Deputy Prime Minister Nick Clegg said the party's "values and priorities" were at the heart of the spending review.

"Liberal Democrat ministers have been involved every step of the way," he wrote. "Our values and priorities are written through the review, like the message in a stick of rock. We have had to make some very difficult choices. But the review is one that promotes fairness, underpins growth, reduces carbon emissions and localises power."

The Lib Dems' deputy leader Simon Hughes also said the coalition was taking "many important decisions" to make spending cuts as "fair as possible".

But Mark Serwotka, general secretary of the Public and commercial Services union, said: "This is the largest cut in public service jobs since the Second World War. Civil servants will lose their jobs, have their redundancy payments cut by two thirds with little prospect of securing employment in the private sector as the economy dips again.

"The brunt of this recession is falling on the shoulders of public sector workers and the people they serve. There is no way that this can be claimed to be fair. People will not stand by and be trampled on by this Government. Unions and community organisations will inevitably work together to co-ordinate our resistance."

Opinion among experts and think-tanks was predictably mixed. The CBI said the cuts were "painful but essential" but Ed Cox, director of ippr north, said: "The severity and speed of the cuts threatens the recovery in Northern England which was hardest hit by the recession and is still struggling to recover."

Gary Williamson, chief executive of Leeds, York and North Yorkshire Chamber of Commerce, said: "The next step now must be for the Government to develop a clear and achievable strategy for growth, which has private sector success and job creation at its heart."

Museums stay free but face tough time

HERITAGE

Jonathan Reed and Nick Ahad

NATIONAL museums will remain free but some of Yorkshire's major museums will still have to make "tough decisions" after having funding trimmed by 15 per cent.

Bosses at the National Coal Mining Museum in Wakefield –who had warned of having to cut opening hours or consider charging for going down the pit, their star attraction – admitted they were relieved that a fierce lobbying campaign had spared them deeper cuts.

Despite the Department of Culture Media and Sport having its overall budget cut by 24 per cent, funding for National Museums – which also include York's National Railway Museum, Bradford's National Media Museum and the Royal Armouries in Leeds – will be cut by 15 per cent over four years instead after the Government pledged to continue free admission.

However, the National Coal Mining Museum – which gets 2.8m a year from the Government – warned it is still set to face a cumulative deficit of 422,319 in four years time.

Museum director Dr Margaret Faull said: "We are extremely grateful to all the people who have campaigned so vigorously on our behalf. The Board of Trustees will need to make some tough decisions, but we are confident that a visit to the Museum will still be a worthwhile and enjoyable experience for the 120,000 people who visit each year."

News of the settlement came after MPs met Culture Minister Ed Vaizey in Westminster on Tuesday, and the Government has told the museum it will not be allowed to charge for entry to the pit.

Jason McCartney, MP for Colne Valley, said: "It's encouraging that the Secretary of State has looked at national museums - and in particular the National Coal Mining Museum – as special cases. He is very aware of the significance and cultural importance of the museum."

However the Arts Council – whose administration budget will be cut by 50 per cent – reacted with dismay to the Government's cuts, warning that it throws the country's cultural provision into jeopardy.

Culture Minister Ed Vaizey said it was "a condition of the settlement" that the Arts Council ring-fences money to go to the groups it regularly supports and denied it was a breach of the arms-length principle that guarantees its independence.

Compensation set at 1.5bn for Equitable Life victims

INSURANCE

Policyholders who lost money as a result of the problems at Equitable Life will receive about 1.5bn in compensation.

The sum is three times higher than the 400m to 500m that former Appeal Court judge Sir John Chadwick recommended policyholders should receive.

But it is well down on the 4.8bn that it is estimated policyholders have lost, compared with what they would have got if they had invested their money with another life insurer.

The first payments should be made by the middle of next year, with 1bn of the compensation due to be paid out in the first three years.

The Government also said 620m of the total would be used to cover the losses suffered by the 37,000 with-profits annuitants in full.

This group of policyholders, dubbed the trapped annuitants, have been hit hardest by the problems at the society, as unlike other members they do not have the option to move their investment elsewhere.

They have seen the value of the retirement income provided by their annuities more than half in some cases, while they also tend to be the oldest policyholders, with more than half of the losses suffered by people aged 75 or over.

With-profits annuitants will receive their compensation through regular annual payments for the rest of their life, effectively replacing the income they have lost.

Chancellor George Osborne said the Government accepted in full the Parliamentary Ombudsman's report, in which she found 10 instances of maladministration by regulators and Whitehall officials in relation to Equitable in the period leading up to December 2001.

He said the Government also thought compensation should be based on the relative losses policyholders had made as a result of being with Equitable, compared with if they had been with another institution, not the actual amount by which their policy values had been cut.NHS plans still amount to major cut as improvement pledges dropped

HEALTHCARE

Mike Waites

Health Correspondent

NHS services face major cuts despite claims by Ministers that health spending will increase above inflation in the next four years.

The Government yesterday dropped several Labour pledges for improved NHS care including free prescriptions for people with long-term conditions and cancer test results within a week.

A key Tory promise to create a 200m cancer drugs fund also appeared to be in doubt after yesterday's review stated it would be "up to" 200m.

But Ministers said plans to increase spending from 104bn this year to 114bn by 2014-15 – equivalent to a real-term rise of 0.1 per cent each year – would mean health spending would be protected from austerity in other parts of the public sector.

Already the NHS has been told to find 20bn in productivity savings including 2bn in Yorkshire and concerns have also been raised it could pick up the cost of social care due to the 26 per cent cuts faced by local authorities.

Chancellor George Osborne yesterday promised an extra 1bn a year for social care taken from NHS funds as part of an overall 2bn of extra funding every year by 2014-15.

Kevin Austerberry, director of the Royal College of Nursing in Yorkshire, said the increase in NHS funding would still feel like a cut.

"The spending review is likely to lead to more strain on healthcare services as job losses mount up and benefits are squeezed," he said.

Dave Prentis, from Unison, said: "The NHS is not safe. Some hospitals are already cutting back on vital life-improving operations such as cataract, hip and knee replacements. The NHS needs extra funding just to stand still."

Nuffield Trust director Jennifer Dixon said: "In reality, unless the NHS can keep a tight grip on pay and price inflation, this will mean a reduction each year in the volume of healthcare services the NHS can deliver if current trends continue."

EURO MPs vote for spending increase

While George Osborne was slashing public spending in this country, Euro MPs in Strasbourg were backing a six per cent increase in EU spending next year.

Despite Ministers warning any such increase would be unacceptable, the European Parliament went ahead anyway to boost the annual EU budget from nearly 108bn this year to more than 114bn in 2011.

The issue now goes into arbitration between MEPs, EU ministers and the European Commission, with this year's budget being rolled over no deal is done by January.

Liberal Democrat MEP for Yorkshire and Humber Diana Wallis said the decision was "flawed".