Chancellor announces abolition of standing charges on household gas bills

Chancellor John Healey announced on 28 October 2026 that he will ask Ofgem, the energy regulator for Great Britain, to remove standing charges from household gas bills, affecting around 23 million homes¹. The change is planned for 2027 or as soon as possible afterwards¹. A standing charge is a fixed daily fee added to a gas bill regardless of how much gas has been used, so a household that uses no gas still pays it¹.

The government says the fixed costs will instead be paid through the unit rate, the price charged for each unit of gas used¹. It estimates that 60% of account-holding households could save an average of £45 a year, rather than the full £108, because the costs move into the unit rate rather than disappearing¹. Under the current price cap, the average gas standing charge for direct debit customers is 29.68p a day, about £108 a year⁴. The government said it will set out "in due course targeted mitigation for a small number of households"¹.

Households that use a lot of gas may pay more once the costs sit in the unit rate. This is Money reported that a home using 14,000 kWh of gas a year, Ofgem's level for a high user, could be around £25 worse off based on current price cap rates, while a household using 7,000 kWh could be around £40 better off⁴. Skint Dad estimated that, applying the 60% figure to 23 million homes, around 13.8 million would save and roughly 9.2 million would not, describing those as its own calculations from rounded government estimates³. The new unit rate and the usage level at which a household starts to pay more have not been published³.

Standing charges on electricity bills are not part of the announcement and will remain⁴. The average electricity standing charge under the current price cap is 55.83p a day for direct debit customers, around £200 a year⁴; Skint Dad gave 54.83p a day³. The Guardian reported that Healey is also looking at removing electricity standing charges, citing the consumer campaigner Martin Lewis, who said the Chancellor described that as "trickier" and likely to take longer². This is Money reported that reform of electricity standing charges would be announced in due course, and that a VAT cut on electricity bills was extended to July 2027⁴.

Why it matters for households

The change does not take effect immediately: current rules and charges remain in place until Ofgem sets out the new rates³. Ofgem has yet to say how the new rates will work for people on fixed deals and prepayment meters³. The government says the change comes at no cost to the public purse². Separately, the Budget announced a £100 energy payment this winter for households in council tax bands A to D, expected to reach about 20 million households at a cost of £2.6 billion, funded by raising the bank surcharge for 15 months from January 2027⁴. Typical energy bills rose 3.6% on 1 October to about £1,723 a year for direct debit customers⁴, and Cornwall Insight expected the January 2027 price cap to rise to £1,999⁴. The Guardian reported a forecast of about £2,000 a year from January². For help with bills, see cutting household bills.

What happens next

Ofgem must set out the new rates and how they will apply to fixed deals and prepayment meters³. This is Money reported that the removal is expected on either 1 October 2027 or 1 January 2028, both dates when a new price cap is announced⁴. The government has said details of mitigation for households that might lose out will follow¹.