Chancellor warned not to axe North Sea energy project to fund defence in carbon capture 'betrayal'

Chancellor John Healey has been warned not to hold back Aberdeen’s oil and gas sector by ensuring extra defence spending does not come at the expense of a key energy project. It is widely anticipated that Mr Healey, who will deliver his first Budget on Wednesday, will signal a ramping up of spending on defence. Mr Healey quit Sir Keir Starmer’s government as defence secretary in protest at a lack of funding being pledged on Britain’s military.

Energy projects earmarked by former net zero secretary Ed Miliband are expected to be in the firing line to make way for the additional defence spending. Mr Miliband used a visit to Aberdeenshire last year to pledge £200 million for the Acorn carbon capture and storage project. The project is crucial for Scotland’s clean energy ambitions. A final investment decision is expected to be made in the UK government’s spending review next year - but cuts to the energy security and net zero budget in the Budget would lay the path for funding for the project to be scrapped.

UK ministers committed £9.4 billion at last year’s spending review to support the carbon capture industry up to 2030, with £21.7 billion pledged over the next 25 years. But speculation has mounted that carbon capture projects could be in line for the axe. David Whitehouse, chief executive of industry body Offshore Energies UK (OEUK), told The Scotsman investment in carbon capture should be coming forward from Westminster. “It is the key time for our carbon storage future,” he said.

“I think the opportunities for Scotland are significant. “Acorn is important, but it's not just Acorn. We see across the North Sea huge opportunities to store carbon dioxide, not just from the UK and Scotland but also from Europe. “I’ve been delighted to see the progress that we're now seeing on the first two track 1 projects. But I do think it is going to be a critical decision at the spending review next year, seeing support coming through for Acorn and the projects that sit beyond that.

“That will be an important message for the industrial sector in Scotland but also for our future in carbon storage.I think critical decisions will lie ahead of us next year.” SNP MP Seamus Logan said: "The Westminster government has dithered and delayed on North East carbon capture for too long and quite frankly this is a complete betrayal of the sector. "Energy security is national security so let's not pretend this is about defence spending - this is about Westminster hammering Scottish industry to patch holes in the Treasury finances just as they always have done.”

Scottish Conservative energy spokesperson, Liam Kerr, said: “Both of Scotland’s governments have repeatedly short-changed the North East when it comes to investing in carbon capture and storage. “Now there are real fears that the UK Labour government is preparing to follow the SNP’s lead and fail to fully support this technology in the Budget. “The people of the North East will be eagerly awaiting to see if Labour’s Budget decides investing in these facilities is no longer a political priority for them and if they will ignore the calls from the industry.”

UK reindustrialisation minister Blair McDougall said: “Both hydrogen and carbon capture undersea storage are an essential part, not just of the reindustrialisation story, but of the net zero story as well. “Decisions on all of these projects will be a matter for the Budget, but we are absolutely committed to the role that hydrogen can play in the UK economy.”