Scrapping fixed gas charges to target 23 million UK homes from 2027
Key Facts
British Treasury Minister John Healey said on October 28 that the government would ask energy regulator Ofgem to scrap daily standing charges on household gas bills, in a move targeting about 23 million homes. The charges apply regardless of how much gas a household uses, and the announcement aims to shift them to the price of each unit of gas consumed. The government said it would task Ofgem with implementing the change in 2027 or as soon as possible thereafter, meaning the charges remain in place for now. The measure changes how fixed costs are distributed among consumers, moving them from a daily charge to a cost linked to consumption. Healey said: "Fixed gas charges are unfair and outdated, so I am scrapping them to give millions of families some breathing room."
Standing charges currently average 108 pounds sterling a year for a typical household, but the government does not expect shifting them into the unit price to deliver equal savings for everyone. The change could save an average of about 45 pounds a year for 60% of energy account holders, according to its estimate. The impact will depend on how much gas a household consumes, because the cost previously paid as a daily charge will be included in the price of each unit used. Other households may therefore not automatically save money after the change. The government said it would set out targeted relief measures for some households that do not benefit from the expected savings.
The announcement forms part of the energy package included in the 2026 budget, published the same day. The package includes a 100-pound household energy payment in 2027 for up to 20 million households in bands A to D in England, with equivalent support funded for the rest of the United Kingdom. The government also extended the temporary cut to value-added tax on electricity bills until July 1, 2027. It said the extension would reduce Ofgem’s annual price cap by about 50 pounds in April 2027. The measures show the budget combining a direct payment to households with steps aimed at lowering some energy costs.
The budget identified a source of funding for energy support by raising the bank corporation tax surcharge from 3% to 6% for 15 months, ending on March 31, 2028. As part of broader energy-sector reform, the government said a new comprehensive framework would begin in 2027 as part of the spending review. The change includes scrapping the levy on gas bills that the previous government had planned to fund hydrogen. The government said the state would fund planned hydrogen projects instead of the levy. The announced change to standing charges is thus part of a set of measures covering the funding of support and planned reform of energy charges.
The announcement came after a decline in British consumer confidence and amid price pressures. The GfK consumer confidence index fell 11 points to -24 in October, its lowest level since April, as economic concerns mounted ahead of the budget. The consumer price index also rose 3.5% in the 12 months to September, compared with an annual increase of 3.1% in August. Later, retail sales data showed that sales volumes in Great Britain fell 0.4% in September from August, after rising 0.7% in the previous month. Year on year, sales volumes rose 0.8% from September 2025.
Despite the monthly decline in September, retail sales volumes rose 0.7% in the third quarter from the second quarter and increased 1.5% from the third quarter of 2025. The Office for National Statistics attributed weak sales in part to falling clothing sales after unusually warm weather, and reported that department store sales declined after growing in July and August. The figures provide context for a budget that announced measures as households face cost-of-living pressures, but they do not determine how shifting gas charges will affect each household. The next retail sales data are due on November 20, 2026. Ofgem will announce the price cap for the period from January 1 to March 31, 2027, on November 25.