Chancellor John Healey is set to announce measures aimed at reducing household gas bills by up to £50 in his forthcoming Budget, while also limiting the Energy Secretary’s authority to impose net zero levies on energy costs. The changes, intended to provide longer-term relief amid rising energy prices, come as part of a broader package of cost-of-living support that the government plans to unveil.
A key reform includes the elimination of standing charges on gas bills, the fixed daily fees charged regardless of consumption that cover the maintenance of the energy network. Instead, these costs will be incorporated into the per-unit price of gas. Industry estimates suggest this adjustment could reduce average annual gas costs by between £22 and £50 for most households. However, heavier energy users may face increased costs under this model, a concern highlighted by Citizens Advice, which warned that larger households, elderly residents, and families with young children might be disproportionately affected by what has been dubbed a “boiler tax.”
Supporters of removing standing charges, such as Mayor Andy Burnham and energy regulator Ofgem, argue the move will help tackle energy affordability, although standing charges on electricity bills, which account for a larger portion of electricity costs, will remain unchanged.
The Chancellor is also expected to initiate reforms targeting green levies introduced under former Energy Secretary Ed Miliband’s net zero policies. These levies, which fund renewable projects like wind farms and hydrogen production, currently make up about 18 percent of electricity bills and 7 percent of gas bills. According to analysis by Boston Consulting Group, the cumulative effect of rising net zero levies could increase electricity bills by over £260 in the next decade. Healey’s plan includes transferring the funding of these green charges from energy bills to general taxation and establishing a new “levy control” framework. This framework would place greater oversight in the hands of the Treasury and Downing Street, limiting the Department of Energy Security and Net Zero’s autonomy to impose levies.
Officials familiar with the plans indicated the changes are intended to curb what they see as unchecked spending powers by the net zero department, which has been characterised by some as a “tax-and-spend” operation. The initiative follows growing concern among government departments, energy industry leaders, and consumer groups about the significant role net zero levies play in driving up household energy costs.
Energy suppliers are forecasting further price increases in the coming months. EDF has projected a 27 percent rise in typical energy bills, pushing annual costs close to £2,200 due to elevated wholesale gas prices influenced by ongoing Middle East conflicts. The current energy price cap stands at £1,723 per year but is expected to rise to approximately £2,389 in April.
Ahead of the Budget, Healey emphasized his commitment to providing “breathing space” to households grappling with everyday costs, alongside targeted support for businesses and the self-employed. He also reiterated his responsibility to maintain fiscal discipline, intending to spend within stringent budgetary rules.
While the Budget will introduce some immediate relief measures, it will defer significant decisions on public spending areas such as social care, welfare, and defense until next year. Welfare benefits are anticipated to increase by 3.5 percent, aligning with inflation.
Opposition figures, such as Shadow Chancellor Andrew Griffith, called on Healey to adopt tougher fiscal measures to address rising government debt and expenditure. The Treasury declined to comment on Budget details ahead of the official announcement.