Chancellor John Healey has announced the abolition of standing charges on gas bills for 23 million homes, a move he said would end an "unfair and outdated" practice and save two-thirds of households an average of £45 a year. The change, to be implemented by energy regulator Ofgem next year or as soon as possible after, was unveiled ahead of his first budget statement in the Commons on Wednesday.
The standing charge is a fixed daily fee included in gas bills irrespective of usage, currently costing the typical household £108 annually. The Treasury estimates that 60% of account-holding households will see their bills reduced by about £45 a year. Around a third of households on fixed tariffs are not covered by the price cap and so are not immediately affected.
Prime Minister Andy Burnham said: “Abolishing gas standing charges is about basic fairness and giving people more control over their bills. I am determined to reform our broken energy market, so it better serves the public interest.” He had asked the Treasury a week ago to look into the issue.
Healey said scrapping the charges would give households “a bit of breathing space”. He added: “My budget will draw a line in the sand on an energy policy that has failed British billpayers for years, letting extra costs on bills pile high and leaving households even more exposed to global shocks.”
Energy Secretary Miatta Fahnbulleh said she would “keep doing everything I can to protect people from unaffordable bills”. Greg Jackson, founder and chief executive of Octopus Energy Group, welcomed the move, saying it represented “real joined-up thinking to make a fairer, more efficient energy system” and that most customers would see a cut in their gas bills, with even higher savings possible if they switch to heat pumps.
The policy follows a VAT cut on electricity bills that took effect at the start of the month, which reduced the October energy price cap by £45 per year. The government has also approved the Jackdaw gasfield in the North Sea and announced a new energy wealth fund to support investment in cheap, clean power, moves the report notes as more controversial.
Analysis
Why This Matters
- The abolition of gas standing charges directly reduces energy costs for a majority of UK households, offering some relief amid cost-of-living pressures.
- The reform signals a shift in government energy policy toward greater fairness and consumer protection, complementing the earlier VAT cut on electricity.
- By changing the structure of gas bills, the move may incentivise more households to switch to heat pumps and other low-carbon alternatives, supporting net-zero goals.
Background
Gas standing charges have been a longstanding feature of UK energy bills, charging a fixed daily fee irrespective of usage. Critics argue that this penalises low-usage households and those who have cut consumption. The government has been reviewing energy market reforms, with the prime minister citing a “broken” system. The latest measure comes alongside a VAT reduction on electricity bills and the approval of new gas extraction, reflecting a mixed approach to energy policy.
What to Watch
- Timing of Ofgem’s implementation: The government wants the change next year or as soon as possible; the regulator’s timeline will be critical.
- Impact on households on fixed tariffs: A third of households not covered by the price cap may not see immediate benefits; the effect on that group remains unclear.
- Progress of the energy wealth fund and the Jackdaw gasfield approval: These will indicate the broader direction of government energy strategy and potential tensions between green investment and fossil fuel extraction.
Checked
12 claims in this story checked against 1 source: 6 supported.
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- Partly supportedThe headline says John Healey abolishes gas standing charges for 23m homes.Business | The Guardian: “John Healey is abolishing standing charges on gas bills for 23m homes”
- Partly supportedThe move will save two-thirds of households an average of £45 a year.Business | The Guardian: “in a move he says will end an “unfair and outdated” practice and save two-thirds of households an average of £45 a year.”
- SupportedHealey announced the abolition of gas standing charges for 23 million homes.Business | The Guardian: “John Healey is abolishing standing charges on gas bills for 23m homes”
- SupportedHealey described the practice as “unfair and outdated”.Business | The Guardian: “Gas standing charges are unfair and outdated so I am scrapping them”
- Partly supportedOfgem will implement the change next year or as soon as possible after.Business | The Guardian: “the chancellor said he would ask Ofgem, the energy regulator for Great Britain, to remove these charges – which are £108 a year for the typical household – next year or as soon as possible after.”
- SupportedThe standing charge currently costs a typical household £108 a year.Business | The Guardian: “these charges – which are £108 a year for the typical household”
- Partly supportedThe Treasury estimates that 60% of account-holding households will have bills reduced by about £45 a year.Business | The Guardian: “The Treasury said the move could save 60% of account-holding households an average of £45 off their annual bill.”
- Partly supportedAround a third of households on fixed tariffs are not immediately affected by the gas standing-charge change.Business | The Guardian: “About a third of households on fixed tariffs are not affected by the price cap, meaning their electricity prices will have fallen when the VAT cut took effect.”
- SupportedAndy Burnham said: “Abolishing gas standing charges is about basic fairness and giving people more control over their bills. I am determined to reform our broken energy market, so it better serves the public interest.”Business | The Guardian: “Abolishing gas standing charges is about basic fairness and giving people more control over their bills. I am determined to reform our broken energy market, so it better serves the public interest.”
- Partly supportedBurnham had asked the Treasury a week earlier to look into the issue.Business | The Guardian: “said a week ago that he was asking the Treasury to look into the issue.”
- SupportedHealey said scrapping the charges would give households “a bit of breathing space”.Business | The Guardian: “I am scrapping them to give millions of households a bit of breathing space.”
- SupportedHealey said: “My budget will draw a line in the sand on an energy policy that has failed British billpayers for years, letting extra costs on bills pile high and leaving households even more exposed to global shocks.”Business | The Guardian: “My budget will draw a line in the sand on an energy policy that has failed British billpayers for years, letting extra costs on bills pile high and leaving households even more exposed to global shocks.”