Chancellor John Healey has announced a £2.6 billion energy price cut for 20 million households, confirming a £100 saving for those living in homes in council tax bands A to D, with the money paid directly into people's bank accounts.
The move, which consumer champion Martin Lewis was pressing for ahead of the Budget, came as Mr Healey also extended a temporary scrapping of VAT on electricity bills from next March through to July, a move he said would save the average customer around £50 a year. A giveaway was widely expected given a forecast inflation-shattering price surge in the depths of winter.
Standing charges to be removed
Mr Healey also confirmed plans to remove the fixed daily fees that households pay on their gas bills. Known as standing charges, they are to pay for maintaining the country's energy network and account for around £108 a year on the average annual bill. However, they are controversial as customers are stuck with paying fees regardless of how much gas they use, or none at all.
Mr Healey has ordered Ofgem to ensure the charges are removed next year - or as soon as possible after - and moved onto the unit rate for gas, or what they pay for what they use instead. The government said the net result is that the average family will save £45 a year, with low gas users benefiting the most. There are concerns, however, that households forced to use heating for medical needs, or because they live in energy leaky homes, will be stung with paying more.
Electricity reforms and winter concerns
Mr Healey also confirmed plans to "set out similar reform for electricity bills", a welcome move given they add around £200 to the average annual bill. The reforms won't benefit bills this winter, a big concern given regulator Ofgem's price cap is forecast to leap by 27% - or almost £470 a year - to almost £2,100 from January 1.
Labour donor Dale Vince, founder of energy firm Ecotricity, has called on the government to "go the whole hog" and remove standing charges from both gas and electricity, and VAT from both fuels.
