John Healey is abolishing standing charges on gas bills for ۲۳m homes in a move he says will end an “unfair and outdated” practice and save two-thirds of households an average of £۴۵ a year.
Ahead of his first budget statement in the Commons later on Wednesday, the chancellor said he would ask Ofgem, the energy regulator for Great Britain, to remove these charges – which are £۱۰۸ a year for the typical household – next year or as soon as possible after.
A standing charge is a fixed daily fee added on top of a household gas bill, regardless of usage. A household could use no gas at all but still must pay the standing charge.
The Treasury said the move could save ۶۰% of account-holding households an average of £۴۵ off their annual bill.
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.”
The prime minister has talked of reforming a “broken” energy market to serve households better, and said a week ago that he was asking the Treasury to look into the issue.
Healey said: “Gas standing charges are unfair and outdated so I am scrapping them to give millions of households a bit of breathing space.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.”
The energy secretary, Miatta Fahnbulleh, added that she would “keep doing everything I can to protect people from unaffordable bills”.
Greg Jackson, the founder and chief executive of Octopus Energy Group, welcomed the move, saying: “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.”
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This follows the government’s VAT cut on electricity bills that came into effect at the beginning of this month.
It means the energy price cap, set by Ofgem, from October was £۴۵ a year less than it would have been. About 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.
More controversially, the government approved the Jackdaw gasfield in the North Sea but also announced a new energy wealth fund to support investment in cheap, clean power.
