The Prime Minister has suggested that homes affected by drilling at shale gas sites could be given a cash payment as compensation.

Speaking at the Liaison Committee yesterday, David Cameron said that, alongside the incentives the government announced this week, where local authorities would be able to keep 100 per cent of the business rates from fracking wells, that additional payments could be made to residents close to the drill sites.

Cameron said “I’m in favour of that” and added that the money should be made “in order to make up for any inconvenience” caused during the development of a shale gas well.

The Prime Minister, who also told MPs that he is “a supporter” of fracking, highlighted that with an “average” extraction rate of 7 per cent from the Bowland Basin, there could be enough gas produced to supply the UK for up to 30 years, and that the shale gas sector could create u to 70,000 jobs.

“If there is an opportunity to extract clean, low cost gas from shale in the UK, we would be making a great mistake if we did not enable this industry to develop,” Cameron said.

The Liaison Committee also quizzed the Prime Minister on the impact that political instability has had on investor confidence. Cameron rebuffed the notion that there had been an investment hiatus in renewable energy sources under the coalition government; he said it was “completely untrue”.

Cameron highlighted that £33 billion of renewable energy investment had been made since 2010, and the run rate of investment had increased from £3 billion a year for the five years prior to 2010, up to £12 billion by 2012.

The PM said this was because “the energy world can now see the Energy Act in place, the strike prices for all these different fuels set out in black and white”, giving them the confidence to invest.

He did say there was a disagreement within the coalition over when a decarbonisation target should be set, and added: “I’m not prepared to set one until we know whether carbon capture and storage works because I think otherwise we’re going to put up people’s bills unnecessarily.”

Cameron said this disagreement was not hurting investor confidence. He told MPs “the only person undermining confidence in the energy market now is one E.Miliband who’s come up with this policy he cannot possibly explain”.