GOVERNMENT plans to use income from controversial fracking to boost the North of England economy are a "fantastic opportunity", say business leaders.

However, environmental campaigners claimed the Chancellor was taking the country in the wrong direction by showing its support for shale gas by creating a sovereign wealth fund.

George Osborne used Wednesday's Autumn Statement to reveal plans to invest shale gas tax revenues in the fund when commercial production begins.

Full details have not been confirmed, but it is understood revenues raised by gas in the North would be spent on boosting the North's economy.

Experts estimate there is 1,300 trillion cubic feet of shale gas under the ground in the North.

Last week, it emerged that a company was seeking permission to drill for shale gas near the village of Kirby Misperton, between Pickering and Malton, in North Yorkshire.

Commenting on the plans for the fund, Mr Osborne said: "It's a way of making sure this money is not squandered on day-to-day spending, but invested in the long-term economic health of the North of England to create jobs and investment there.

"A sovereign wealth fund for the North of England based on the shale gas - there is another exciting idea, another part of building a Northern powerhouse."

North East Chamber of Commerce head of member relations, Rachel Anderson, said the potential of fracking was still being explored.

However, she added: "A sovereign wealth fund for fracking represents a fantastic opportunity for our region and received the backing of members in the Tees Valley when it was discussed at our last area meeting in Redcar.

"We could benefit greatly from the retention of some of the funds for investment in infrastructure, community development or education for example."

But North-East Friends of the Earth campaigner, Simon Bowens, said the future of the North in becoming a "clean, resilient, low carbon, high quality of life economy".

“The Chancellor is taking us in the wrong direction if he wants to build a Northern powerhouse by burning more fossil fuels through fracking," he said.

Professor Andy Aplin, from Durham University's earth sciences department, said it was too early to say if shale gas could increase the UK’s energy security, support thousands of jobs, reduce carbon emissions, and generate substantial tax revenue, as claimed by the Chancellor.

“Any and all of this depends on the amounts of gas which can be produced economically, which is currently unknown due to the almost complete absence of exploration wells," he said, adding that he welcomed the Government’s decision to invest in test sites to gather data.