Budget 2026 live updates: Gas bill standing charges to be scrapped for 23 million homes
Chancellor John Healey has announced that standing charges are to be scrapped from household gas bills, just hours before he delivers his first Budget.
The move comes in a bid to make the energy system fairer and give some families breathing space.
Standing charges from household gas bills will be removed for around 23 million homes.
Action from the Chancellor and Energy Secretary will make the energy system fairer and give some families breathing space.
Tens of millions of households will no longer pay standing charges on their gas bills as the Government gives families more control over what they pay.
A standing charge is a fixed daily fee added on top of a household gas bill, regardless of how much gas has been used. A household could use no gas at all but still must pay the standing charge.
The Chancellor will announce today an end to this unfair and outdated practice. He will ask Ofgem to deliver removal of these charges – which are £108 a year for the typical household on average – in 2027 or as soon as possible after.
Instead, these fixed costs will be paid on the unit rate, which could save 60% of account-holding households around an average of £45 off their annual bill.
Households not seeing an automatic saving will still have better control over their bills without the worry of affording the standing charge, and the government will set out in due course targeted mitigation for a small number of households.
This comes ahead of today’s Budget that Chancellor of the Exchequer, John Healey said would give families “breathing space for today and fresh hopes for the future.”
He added: “This Budget is designed to give households breathing space from some of the everyday costs, provide targeted support for businesses and self-employed people, and to start the long-term action needed to get energy costs down for good.
But breathing space today must go hand-in-hand with building for the future.”
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.”
Chancellor of the Exchequer John Healey added: “Gas standing charges are unfair and outdated so I am scrapping them to give millions of households a bit of breathing space.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.”
Energy Secretary Miatta Fahnbulleh said: “Too many families face unfair charges, so we're making it easier for people to take control of their energy bills.
“By removing one of the nation's bugbears - taking standing charges off gas bills, with extra support for those who need it - we'll give millions of people breathing space.
“Tackling affordability is my number one priority, and I will keep doing everything I can to protect people from unaffordable bills.”
Greg Jackson, Founder and CEO of Octopus Energy Group, said: "This represents real joined-up thinking to make a fairer, more efficient energy system, delivering what customers want - lower standing charges and further improving the ratio of electricity to gas prices. Most customers would see a cut in their gas bills which is crucial, but would also enjoy even higher savings if they can move to heat pumps when it suits them."
This follows the Government’s VAT cut on electricity bills that came into effect at the beginning of this month which is already supporting households.
It means the Energy Price Cap from October was £45 a year less than it would have been. Around 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.
While the government is giving people short term relief on their energy bills, it is also taking action to fix Britain’s energy problems for the long term.
Last week, the Government announced a new Energy Wealth Fund which will support investment in cheap, clean power.
In a video message ahead of the Budget the Chancellor of the Exchequer, John Healey said: “Breathing space for today and fresh hope for the future. That's what today's Budget will deliver.
“The world’s a highly uncertain place. Conflicts abroad are pushing up energy prices, and the cost of living here at home - piling pressure on the families, on businesses, and on our public finances.
“But Britain's economy is showing real signs of resilience: investments up, productivity is growing, and we had the joint fastest growth in the G7 in the first half of this year.
“We can't stop these shocks that hit Britain, but we can make Britain more resilient when they do.
“So, this Budget is designed to give households breathing space from some of the everyday costs, provide targeted support for businesses and self-employed people, and to start the long-term action needed to get energy costs down for good.
“But breathing space today must go hand-in-hand with building for the future.
“So, we'll back British businesses and entrepreneurs, we'll invest in the technologies that drive future growth, and we'll build more homes, shift power out of Whitehall, so that leaders locally can drive growth in every postcode.
“And in an uncertain world, we will strengthen national security and our defences, as well as our support for Ukraine.
“We'll do all of this responsibly, sticking within tight fiscal rules, and make sure every pound is well invested.
“Because this Budget is about getting through this difficult moment. But it's also about putting Britain on a future path, a better future path.
“Breathing space today, and fresh hope for the future.”