Chancellor to Abolish Gas Standing Charges for Millions of Households

Chancellor John Healey has announced that the government will abolish standing charges on gas bills for approximately 23 million homes. The policy shift is intended to end what Healey described as an unfair and outdated practice that has long burdened consumers. The Treasury estimates that this change will provide financial relief to sixty percent of account-holding households, with an average annual saving of £45 per home.

The announcement was made in advance of Healey’s first budget statement in the House of Commons, which is scheduled for later this week. As part of the plan, the chancellor intends to ask Ofgem, the energy regulator for Great Britain, to remove these charges next year or as soon as possible thereafter. For the typical household, these standing charges currently amount to £108 per year.

A standing charge is defined as a fixed daily fee that is added to a household gas bill regardless of actual usage levels. Under the current system, a consumer is required to pay this fee even if they use no gas at all during the billing period. By eliminating this fixed cost, the government aims to make energy pricing more reflective of actual consumption patterns.

Andy Burnham, the energy secretary, stated that abolishing these charges is a matter of basic fairness and aims to give people greater control over their bills. He expressed determination to reform what he called a broken energy market so that it better serves the public interest. The prime minister has previously discussed the need to reform the energy sector and noted that he had asked the Treasury to investigate the issue just one week ago.

Healey emphasized that the decision is designed to give millions of households some breathing space. He argued that his budget draws a clear line in the sand regarding an energy policy that has failed British billpayers for years. According to the chancellor, the previous approach allowed extra costs to pile up, leaving households more exposed to global economic shocks.

Miatta Fahnbulleh, the energy secretary, added that she would continue to do everything possible to protect people from unaffordable bills. This stance aligns with the broader government goal of stabilizing household energy costs and improving the overall efficiency of the energy system.

Greg Jackson, founder and chief executive of Octopus Energy Group, welcomed the move as an example of joined-up thinking. He noted that the change delivers what customers want, specifically lower standing charges and an improved ratio of electricity to gas prices. Jackson suggested that most customers would see a cut in their gas bills, with even higher savings possible for those who transition to heat pumps.

This announcement follows the recent implementation of a VAT cut on electricity bills at the beginning of the month. As a result of that measure, the energy price cap set by Ofgem from October is £45 a year less than it would otherwise have been. While about a third of households on fixed tariffs are not directly affected by the price cap, their electricity prices have also fallen following the VAT reduction.

In related developments, the government recently approved the Jackdaw gasfield in the North Sea. At the same time, it announced the creation of a new energy wealth fund to support investment in cheap and clean power sources, aiming to balance immediate cost relief with long-term energy strategy.