Healey scraps standing charges on household gas bills – Daily Business

The UK government wants to get bills down

More than 20 million households will no longer pay standing charges on their gas bills, as the government targets reform of the “broken energy market”.

Chancellor John Healey will also scrap green levies on bills and put them on general taxation. He will commit the government to removing the link between gas and electricity prices, which significantly inflates household bills, in the long term.

A standing charge is a fixed daily fee added to a gas bill, regardless of how much gas has been used. A household could use no gas at all but must pay the standing charge.

Mr Healey will ask Ofgem to deliver removal of these charges – £108 a year for the typical household on average – in 2027 or as soon as possible.

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.

Mr 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.”

Mr Healey added: “Gas standing charges are unfair and outdated so I am scrapping them to give millions of households a bit of breathing space.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.”

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.”

The move on standing charges follows the cut in VAT on electricity bills that came into effect at the beginning of this month. However, this amounts to just £45 a year.

Energy levies axed

Mr Healey is expected to announce long-term plans to remove green levies from energy bills and put them on general taxation.

He will also commit the government to removing the link between gas and electricity prices, which significantly inflates household bills, in the long term.

The budget calculations will assume that Rosebank, an oil and gas field west of Shetland, is approved despite deepening cabinet splits on the plans.

ISA plan scrapped

The Chancellor is set to reverse Rachel Reeves’ plan to cut the Cash ISA allowance from £20,000 to £12,000.

The decision likely means ‘anti-avoidance’ measures – namely a proposed ban on transfers from Stocks and Shares ISAs to Cash ISAs and a 22% tax charge on cash or ‘cash-like’ investments held in Stocks and Shares ISAs – will also be dropped.

The proposals had been widely condemned for adding complexity to an already complicated ISA landscape without any evidence they would encourage more people to invest for the long-term.

However, Michael Healy, CEO of IG Consumer, said the Chancellor has “squandered a golden opportunity to help British households build long-term wealth and get more money flowing into the businesses that drive our economy.”

He added: “At a time when Britain desperately needs growth, protecting tax incentives that encourage people to sit on cash rather than invest is a deeply misguided decision.

“Cash ISA subscriptions surged by £26.1 billion last year, more than four times the increase in Stocks & Shares ISAs, yet the Chancellor has chosen to reinforce the very savings culture that is holding Britain back.

“Worse still, IG modelling suggests phasing out Cash ISAs for new contributions could generate up to £610 million in additional annual tax revenue by 2032-33, without touching existing savings.

“This Budget should have been about making Britain’s money work harder for its people and its economy instead of  defending a tax break that most savers don’t need.

“The Chancellor should have gone further by phasing out Cash ISAs for new contributions and redirecting those incentives towards helping households invest, build financial security and share in Britain’s future growth.”

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