Chancellor John Healey has announced plans to scrap gas standing charges in the Budget, a move that will affect around 23 million households by the end of 2027 or as soon as possible afterwards. The charge currently costs a typical household about £108 a year and must be paid regardless of how much gas is used.
Scrapping the standing charge does not mean those costs disappear. Instead, they will be moved onto the unit rate, meaning more people's gas bills will depend on how much gas they actually use. Households that use less gas are generally expected to save money, while some people with particularly high gas use could end up paying more.
Government Estimates and Expert Views
The Government estimates 60% of account-holding households could save an average of around £45 a year from the change. Prime Minister Andy Burnham said: "Abolishing gas standing charges is about basic fairness and giving people more control over their bills."
MoneySavingExpert founder Martin Lewis, who has campaigned against standing charges for years, explained: "The gas Standing Charge will be scrapped in 2027 (my guess, either for October 1 Price Cap or the January 1, 2028 Price Cap). It's currently £108 a year. That cost will be shifted onto unit rates. We don't know how much yet, but I suspect just under 1p per kwH."
Impact on Different Households
Analysis from innovation charity Nesta estimates that 64% of dual-fuel households would be better off if the gas standing charge is abolished. It estimates that bills could start increasing for households using around 12,400kWh of gas a year or more. A typical household using 9,500kWh could save about £27 a year under Nesta's analysis.
Mr Lewis said: "About 60% of people will pay less due to this, 40% more. My guesstimate is the dividing line will be somewhere around 12,500 kilowatt hours of gas (can't know until there is actual pricing). According to a study by Nesta, this switch would leave the majority of people in all income groups under £100,000 better off."
Nesta's analysis suggests lower-income households could particularly benefit. It estimates 86% of households in the poorest income group would be better off, compared with 24% of those in the wealthiest group.
Tips to Reduce Energy Use
Andrew Sissons, director in sustainable future at Nesta, said: "Ditching the gas standing charge rightly takes a big chunk off millions of people's energy bills, sharing costs more fairly and giving cash-strapped households a much-needed boost. This measure will provide relief to the poorest households who ration their gas use but it will also mean that switching to electric heating such as heat pumps is a better deal for some households that use more gas."
For households that could end up paying more because they use larger amounts of gas, cutting their energy use could become even more important. One of the simplest changes involves pressing one button and turning down the thermostat by just one degree.
The Energy Saving Trust says households in Great Britain could save around £120 a year by lowering their thermostat from 22C to 21C. It estimates the same change could save around £80 a year in Northern Ireland. Turning down the thermostat means your heating has a lower target temperature to maintain, which can reduce the amount of energy needed to heat your home.
The Energy Saving Trust says people should set their thermostat to the lowest temperature that still feels comfortable. For most people, this is somewhere between 18C and 21C. People who currently have their thermostat set at 22C could therefore try lowering it by one degree to 21C.
There are other simple ways people can reduce the amount of energy they use without leaving their homes cold. Thermostatic radiator valves can be used to keep rooms that are regularly used warmer while reducing the temperature in rooms that are not being used. Closing curtains when it gets dark and tackling draughts can also help keep heat inside the home. Households with a boiler can also use a timer or heating schedule so the heating is not running when nobody is home or when it is not needed.
Mr Lewis also warned people on fixed energy deals not to make any quick decisions because of the standing charge announcement. He said: "As for those on fixes: if you get a fix now, the rate of your fix is fixed, so this should not affect it. You will pay what you pay and if it has Standing Charges they will continue (some asking if they should delay fixing because of this; no, if a fix is right for you and will save you money, don't let this change that – this is about the structure of bills, as opposed to the actual costs on bills)."
