Only £12m of promised £200m of UK grant funding will be handed over to Acorn carbon capture project

The UK Labour Government has been accused of being “in a web of lies” after it emerged only £12 million of a promised £200m grant for a key North Sea energy project will be handed over. A row has erupted within the UK government after Chancellor John Healey’s Budget said a £200m grant for the Acorn carbon capture and storage project would now be switched to loans through financial transactions, causing uproar in the North East. The UK Treasury and the department for energy security and net zero have been at odds over whether the funding had changed before an admission the grant funding has been pulled.

The project, being brought forward by partners including Storegga and Shell at the St Fergus gas terminal near Peterhead, could support up to 15,000 North Sea jobs - while the Scottish government’s net zero blueprint is reliant on the facility being constructed. But The Scotsman has learned that only £12m of the promised £200m fund has been handed over to the developers, with no more direct grant cash to follow other than the 6 per cent proportion of the vowed grant.

Russell Borthwick, chairman of the Aberdeen and Grampian Chamber of Commerce, said: “Less than 24 hours after the long-awaited green light for the new Peterhead Power Station, the UK government made an announcement in the Budget which appeared to roll back its commitment to the Acorn CCUS project, a retrograde step not only for the North East but for Scotland’s wider industrial base and decarbonisation targets. “The claim and counter claim around this since Wednesday is unhelpful and symptomatic of the entirely unjoined up policy we are seeing in all parts of the energy transition”.

Mr Borthwick has called for a “a cross government roundtable with developers, Scottish Enterprise and other key stakeholders is convened to get this project back on track”. He added: “If this doesn’t happen, thousands of Scottish jobs, billions of economic value and the ambition of net zero are gravely at risk.” A UK government source admitted that the messaging around the Acorn project in the Budget had been “a complete mess”. SNP MP Karen Adam branded the situation “an absolute shambles”.

She added: “Douglas Alexander and Labour MPs from Scotland have tried to deceive the public and they’ve been caught in a web of lies. “Scottish carbon capture has been utterly betrayed and with each passing day that betrayal gets worse. £12m is so inconsequential it's no wonder they’ve been too ashamed to disclose it. “£400bn from our oil and gas has been syphoned off while investment in our key infrastructure is withdrawn - meantime £12bn is found for projects down south.

“The injustice is there for everyone to see and Scottish Labour MPs should have their heads in shame.” Mr Alexander, the Scotland Secretary, told journalists in Glasgow that the overhaul of funding for the Acorn project means “the taxpayer benefits in a way that you don’t benefit from grant funding”. He added: “The loan funding mechanism that’s put in place means that we are sharing the success of the project going forward. “We remain committed to Acorn both because of the potential it delivers for the North East, the contribution it makes to climate change mitigation and because we believe there’s a project that we want to support.”