Britain is to scrap the standing charge on gas bills for about 23 million homes, in a Budget move the Treasury says will end a fixed fee that costs a typical household around £108 a year whether the heating is on or not. Chancellor John Healey will confirm the change in his first Budget on Wednesday, and the Treasury said he will ask the energy regulator, Ofgem, to remove the gas standing charges "in 2027 or as soon as possible after".
A standing charge is the fixed daily fee added to an energy bill regardless of how much gas a household uses. It does not pay for the gas itself. It covers the cost of delivering gas to homes and businesses, including the essential maintenance and infrastructure upgrades that keep the network running — which is why the charge lands on every bill even through the summer months, when many homes barely use any gas at all.
Under the plan, those fixed costs will instead be recovered through the unit rate — the price households pay for each unit of gas they actually use. The Treasury said the shift could save 60 percent of households an average of £45 a year on their bills. The gain is biggest for people who use the least gas: a household that keeps its consumption low will no longer hand over £108 a year in fixed fees before it has heated a single room, and from the day the change takes effect, what it pays will track what it uses.
Mr Healey said: "Gas standing charges are unfair and outdated so I am scrapping them to give millions of households a bit of breathing space. 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." In a video message ahead of the statement, he said the Budget "is designed to give households breathing space from some of the everyday costs" and to start "the long-term action needed to get energy costs down for good".
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." Mr Burnham told the Commons last week that he had asked Mr Healey and Energy Secretary Miatta Fahnbulleh to examine abolishing standing charges, and the Chancellor has also signalled he will look at removing the fixed daily fees on electricity bills as well.
The change is not a saving for everyone. MoneySavingExpert founder Martin Lewis, who met the Chancellor at No 11 on the morning of the Budget, said he was "pleased" with the move, but set out the arithmetic plainly: "about 60% of people will pay less due to this, 40% more", with the dividing line "somewhere around 12,500 kilowatt hours of gas". Moving the fixed costs onto the unit rate works out at just under 1p per kilowatt hour, he said, so households that use large amounts of gas — including low-income families in poorly insulated homes — could end up paying more, and he called for support for vulnerable higher users. Concerns have also been raised that some low-income consumers who use large amounts of energy could be left worse off if the costs simply move onto the unit rate. The Treasury said ministers will "set out in due course targeted mitigation for a small number of households", without giving details yet.
Ofgem will now have to put the change into effect, and no firm start date has been set. The regulator has long pointed out that the costs behind standing charges do not disappear when the charge is removed — they can only be moved to another part of the bill — so tariffs without a standing charge carry a higher unit rate and do not automatically save money for every customer. Mr Lewis predicted the policy would be implemented at the same time as either the October 1, 2027 or the January 1, 2028 price-cap change. On electricity, he said the Chancellor told him he would talk to Ofgem about removing that standing charge too, but that it is "trickier" and will take longer.
The announcement lands on top of a painful backdrop for billpayers. Household energy bills rose in October with a 4 percent rise in Ofgem's price cap, and forecasters at Cornwall Insight predict the cap will rise by a further 16 percent to £1,999 a year on January 1 — up £276 on the current level and the biggest rise since January 2023. The Government has already temporarily removed the 5 percent VAT from electricity bills until March 31 next year, worth around £45 a year, while households are still paying 5 percent VAT on gas.
Campaigners gave the decision a warm but guarded welcome. Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said removing the charge would "bring real relief to many low-income households who use very little energy and for prepayment customers it could stop debt building up in the summer months", and he welcomed reports that green levies could also be moved off electricity bills and into general taxation. "But despite the positives of the gas standing charges proposal, millions of households won't see a saving," he said. "This means ministers have serious questions to answer about who they are and, if they are vulnerable or on low incomes but have high energy needs, how they will be protected." Critics of the wider Budget were harsher: Green Party leader Zack Polanski dismissed the statement as "a catastrophic let down" built on "cosmetic tweaks that will do nothing to buffer people against the fossil fuel rollercoaster".
Mr Healey is delivering his first Budget in the role against an uncertain economic backdrop, sticking with the fiscal rules set by his predecessor, Rachel Reeves, which require day-to-day spending to be financed by taxes rather than borrowing by 2029/30, with public debt falling as a share of the economy in the same year. For the roughly 23 million homes on gas, though, the measure that will be felt first is the simplest one: a £108-a-year charge that arrives whatever the weather and whatever a family does to economise is on its way out — and from 2027, the bill will start from what a household actually uses.
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