Chancellor to scrap gas standing charges for 23 million homes

A long-standing component of domestic energy costs is set to be removed, pitting the Treasury against years of regulatory precedent. Chancellor John Healey announced he will seek to eliminate standing charges on gas bills for 23 million homes. The policy targets a fee that currently costs the typical household £108 a year, regardless of how much gas is consumed.

Healey described the practice as unfair and outdated. He stated he is scrapping the charges to provide millions of households with breathing space. The Treasury estimates the change will reduce annual bills by an average of £45 for 60% of account-holding households. The plan is to instruct Ofgem, the energy regulator for Great Britain, to remove these charges next year or as soon as possible after that deadline.

The announcement comes ahead of Healey’s first budget statement in the Commons. Prime Minister Andy Burnham has previously called for reforms to what he termed a broken energy market. Burnham added that abolishing these fees is about basic fairness and giving people more control over their bills. He expressed a determination to reform the market so it better serves the public interest.

Miatta Fahnbulleh, the energy secretary, said she would continue to work to protect people from unaffordable bills. Greg Jackson, chief executive of Octopus Energy Group, welcomed the decision. He called it real joined-up thinking aimed at making the energy system fairer and more efficient. Jackson noted that most customers would see lower gas bills and could enjoy even greater savings if they switch to heat pumps.

The move follows a recent reduction in VAT on electricity bills, which took effect at the start of this month. That tax cut lowered the Ofgem price cap by £45 a year for October. Approximately one-third of households on fixed tariffs are not affected by the price cap, meaning their electricity prices fell when the VAT cut began. The government also approved the Jackdaw gasfield in the North Sea and announced a new energy wealth fund to support investment in cheap, clean power.

The standing charge is a fixed daily fee added on top of usage costs. A household could use no gas at all but would still be required to pay this amount. The Treasury’s projection that 60% of households will save an average of £45 relies on the removal of this specific fixed cost. The decision effectively shifts the regulatory burden from a daily fee structure to a model based more closely on consumption.