GEORGE Osborne has been accused of "desperation" by Scottish environmental campaigners after it emerged tax breaks are to be offered to firms involved in fracking for natural gases.

The Chancellor is backing an allowance that will cut by more than half the revenues due on some of the income from production in an attempt to kick-start UK exploration. He hopes it will create one of the most generous tax regimes for shale gas exploration in the world.

Although all the major projects are south of the Border, concern has also been highlighted about a possible project to mine for methane gas by an Australian energy firm in two fields at Airth near Falkirk, Stirlingshire. Campaigners are hoping the plans will go to a public inquiry.

Mr Osborne said: "Shale gas is a resource with huge potential to broaden the UK's energy mix.

"We want to create the right conditions for industry to explore and unlock that potential in a way that allows communities to share in the benefits. This new tax regime, which I want to make the most generous for shale in the world, will contribute to that.

However, Dr Richard Dixon, director of Friends of the Earth Scotland, said: "This is a sign of desperation. This is the third time Mr Osborne has given tax breaks to the industry. It's because people realise the principle key gas is not there."

America's shale gas boom has boosted tax revenues, created jobs, reduced energy imports and brought down household fuel bills.

Dr Dixon added: "It's far more difficult for companies to get started than in America and only way the industy can get going is with massive tax breaks."

There are fears the hydraulic fracturing [fracking] of rock with high-pressure liquid to release the gas, can cause earthquakes, pollute water supplies, blight the countryside and affect house prices.