The UK is to launch a sovereign wealth fund with the receipts of shale gas revenue, the government has confirmed.

First mentioned in July’s Budget, chancellor of the Exchequer George Osborne confirmed its creation during the Autumn Statement, when he pledged to support the shale gas industry “by ensuring communities benefit from a shale wealth fund”.

The UK Treasury also revealed that up to 10% of shale gas tax revenue would be diverted to the new sovereign wealth fund, which it said would invest in local communities “hosting shale gas developments”.

It estimated the fund would be able to deploy capital of up to £1bn (€1.4bn) over the next 25 years.

No further details of how the fund might be managed were included in documents published by the Treasury, nor was it clear whether it would be directed to invest in local community projects or free to invest across the UK.

The UK, unlike countries such as Norway, did not establish a sovereign wealth fund to receive revenue from its sale of oil.

However, the Shetland Islands in 1976 began using revenue from its oil extraction to fund a locally targeted charitable trust.

The Shetland Charitable Trust now manages more than £200m, handing out grants to local projects on the Scottish island.

The devolved Scottish government also proposed the launch of a Scottish sovereign fund during the 2014 independence referendum, arguing that, had such a venture been launched in 1980, the UK would be in possession of a £110bn fund.