Gas bills: Chancellor to cut fixed fees for 23 million homes

A daily fee added to every gas bill will be eliminated for roughly 23 million homes in Great Britain, according to a government announcement. Chancellor John Healey revealed the plan ahead of his first budget statement, which is scheduled for later this week in the House of Commons.

The Treasury estimates the change will save the average household £45 annually. This reduction applies to sixty percent of account-holding households. Under current rules, consumers pay a fixed standing charge of £108 per year regardless of how much gas they actually use.

Healey described the standing charge as an outdated practice that unfairly burdens consumers. He stated that the budget aims to give millions of households breathing space by removing a cost that does not reflect real consumption. The chancellor argued that previous policies allowed extra costs to pile up, leaving families more exposed to global economic shocks.

The government intends to ask Ofgem, the energy regulator, to remove these charges next year or as soon as possible thereafter. The goal is to make energy pricing more closely aligned with actual usage patterns. This shift follows a recent cut in VAT on electricity bills, which took effect at the beginning of October.

Energy Secretary Andy Burnham called the abolition of the charge a matter of basic fairness. He said the reform aims to give people greater control over their bills. Burnham expressed determination to fix what he described as a broken energy market so it better serves the public interest.

Prime Minister Keir Starmer had previously discussed the need for sector reform. He noted that he asked the Treasury to investigate the issue just one week ago. Miatta Fahnbulleh, also an energy secretary, added that she would continue to protect people from unaffordable bills.

Greg Jackson, chief executive of Octopus Energy Group, welcomed the decision. He called it an example of joined-up thinking that delivers what customers want. Jackson suggested that most customers would see lower gas bills, with even higher savings possible for those who switch to heat pumps.

The VAT cut on electricity has already lowered the Ofgem price cap by £45 per year compared to the previous level. While about a third of households on fixed tariffs are not directly affected by the cap, their electricity prices have also fallen due to the VAT reduction.

In related developments, the government recently approved the Jackdaw gasfield in the North Sea. It also announced a new energy wealth fund to support investment in cheap and clean power sources. These moves aim to balance immediate cost relief with long-term energy strategy.