Chancellor to slash gas bills by £45 for 23 million households

The government will eliminate fixed daily fees on gas bills for roughly 23 million homes, a move that will save the average household £45 each year. Chancellor John Healey announced the policy before his first budget statement in the House of Commons later this week. The Treasury estimates that sixty percent of account-holding households will see direct financial relief from the change.

Under the current system, a standing charge is a fixed daily fee added to a gas bill regardless of usage. Consumers pay this amount even if they use no gas during the billing period. For a typical household, these fees total £108 annually. By removing this cost, the government aims to align energy pricing more closely with actual consumption patterns. Healey plans to ask Ofgem, the energy regulator for Great Britain, to remove these charges next year or as soon as possible thereafter.

Energy Secretary Andy Burnham described the abolition of these charges as a matter of basic fairness. He stated the measure aims to give people greater control over their bills and to reform what he called a broken energy market. The Prime Minister discussed the need for energy sector reform just one week ago, asking the Treasury to investigate the issue.

Healey argued that the previous approach allowed extra costs to pile up, leaving households exposed to global economic shocks. He said the decision gives millions of households breathing space and draws a clear line regarding an energy policy that has failed British billpayers. Miatta Fahnbulleh, the energy secretary, said she would continue to do everything possible to protect people from unaffordable bills.

Greg Jackson, founder and chief executive of Octopus Energy Group, welcomed the move. 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 higher savings possible for those who transition to heat pumps.

This announcement follows a VAT cut on electricity bills implemented at the beginning of the month. As a result, the energy price cap set by Ofgem from October is £45 lower 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.

The government recently approved the Jackdaw gasfield in the North Sea and announced the creation of a new energy wealth fund. This fund is designed to support investment in cheap and clean power sources, aiming to balance immediate cost relief with long-term energy strategy.