Chancellor Healey to remove £108 yearly gas standing charge

Chancellor John Healey announced on Wednesday that the UK government will abolish fixed daily gas charges for 23 million households. The change removes a fee that consumers pay regardless of how much gas they use. A home that consumes zero gas will no longer incur that cost.

The Treasury estimates the policy will save 60% of account-holding households an average of £45 per year. The current standing charge stands at £108 annually for the typical home. Healey plans to direct Ofgem, the energy regulator for Great Britain, to remove the fee next year or as soon as possible after that date.

The announcement came ahead of Healey's first budget statement in the House of Commons. The prime minister stated a week ago that he was asking the Treasury to examine the issue. He described the current energy market as broken and said it needed reform to better serve households.

Energy Secretary Miatta Fahnbulleh said she would continue working to protect people from unaffordable bills. Andy Burnham called the change a matter of basic fairness. He said the move gives people more control over their bills and helps reform the market to serve the public interest.

Greg Jackson, chief executive of Octopus Energy Group, welcomed the decision. He said the move represents joined-up thinking to create a fairer and more efficient energy system. Jackson noted that most customers would see a cut in their gas bills. He added that savings could be higher for customers who move to heat pumps.

The standing charge removal follows a value-added tax cut on electricity bills that took effect at the start of October. That tax change lowered the Ofgem price cap by £45 per year for the October period. About one-third of households on fixed tariffs are not affected by the price cap, so their electricity prices fell when the tax 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.