Autumn Budget: Gas standing charges to be removed – consumer credit industry reaction

Chancellor John Healey has set out the Government’s spending plans in his Budget, the first since Andy Burnham became Prime Minister.

One of the key announcements was that standing charges, fixed daily fees customers pay regardless of usage, are to be removed from household gas bills in England, Scotland and Wales, with costs added to the unit rate instead.

CEO OF E.ON UK, Chris Norbury, said“We welcome measures that have the potential to make energy cheaper for customers and can confirm that E.ON Next customers will see gas standing charges removed from their bills once the timings are confirmed by Government. It’s clear that people are struggling with rising energy bills and we must give them breathing space. The most effective and immediate way to do this is to provide targeted support to the people who need it most and cut bills by shifting policy costs into general taxation. 

“But to sustainably lower bills, we must electrify heating and accelerate consumer flexibility through the deployment of batteries, so people can store energy when it’s cheaper and use it at more expensive times. That’s how we give people greater control while reducing network pressure and increasing energy security, and that’s how we make new energy work and ensure no one is left behind.”

Energy UK’s Chief Executive Dhara Vyas said “Moving gas standing charge costs onto the unit rate will be good news for many customers but when making the change, it will be very important to support those low-income households who will otherwise lose out.

“Our latest report with Mitsubishi Electric on reducing the price of electricity relative to gas – also known as the spark gap – to accelerate electrification recommended moving the gas standing charge onto the unit rate from April 2028, and stressed that the change needed to be accompanied by a social discount scheme to protect low-income households who have no choice but to use a lot of gas. It will also be important to ensure the change doesn’t increase suppliers’ financial risk.

“At the same time, it would address a problem many Pay-As-You-Go (or prepayment) customers face. Those customers who only use gas for heating in the winter still run up a backlog of standing charges during the summer months – and that debt then has to be paid off before they can start using their heating again.

“Standing charges cover the fixed infrastructure and operational costs required to keep homes connected to the energy system, regardless of how much gas or electricity is consumed. These costs need to be recovered elsewhere and as any change will create winners and losers, it needs to be introduced carefully. So it is critical the Government and Ofgem work closely with industry and consumer groups on implementation to avoid negative consequences.”

Dame Clare Moriarty, Chief Executive of Citizens Advice, said “We welcome efforts to ease the relentless cost-of-living squeeze. Additional support this winter will give most households a helping hand, but significant gaps remain.

“With energy prices expected to soar, adding £60 a month to already inflated bills, many are left facing another difficult winter. For people hit the hardest, more support will be needed, and without further action, shifting gas standing charges into unit prices risks punishing people on low incomes with higher heating needs.

“To make a real difference now and beyond, the government must go further, ensuring support is targeted and reaches those with the greatest energy needs, including families with children and disabled people.”

Tamsin Powell, Consumer Finance Expert at Creditspring said “Today’s £100 household energy payment is welcome, as is the extension of the VAT cut on electricity until July, but ultimately it won’t go far enough for many households. Despite the removal of VAT from electricity earlier this month, it hasn’t stopped bills rising. The price cap still went up for a typical household from 1 October, and forecasters expect another rise in January, in the coldest part of winter.

“For households already managing on tight budgets, this is another pressure point at exactly the wrong time of year. Rising energy costs were one of the public’s biggest Budget concerns, cited by 51% of people in our research, and direct help with energy bills is their number-one ask of the Government, backed by 46%. Among over-55s, 40% have kept the heating off when they needed it because of money worries.

“Any support is valuable, but with bills set to keep rising, it is essential that help reaches everyone who is struggling this winter.”

John Doughty, Managing Director of Just Mortgages, said“The Chancellor was clear that this Budget was all about giving Britain “breathing space” amid “global economic storms”.  Whether it’s one-off energy payments and extending VAT relief on energy bills, suspending tariffs on supermarket goods or keeping the cut in fuel duty, it’s fair to say we did see examples of this.

“In our world, breathing space is needed when it comes to affordability – making sure people can realise their dreams of homeownership amid rising costs and higher rents. We welcome further details on Your First Home and the news of £4.7bn in government-backed lending, with a sensible approach to both income and property price caps. It’s important that such a scheme recognises that the challenges facing FTBs aren’t limited to those on lower incomes, while property caps reflect the significant differences in housing costs across the country – particularly in the capital where the original Help to Buy scheme was so welcome. Keeping the interest-free period to five years like Help to Buy is also encouraging, giving buyers some certainty over costs in those early years, while lining up with the typical mortgage fixed-rate period.

“Ensuring a broad range of housebuilders, including smaller and regional developers, can participate will be important. The sliding scale for developer contributions is therefore encouraging, but the scheme’s success will largely depend on having a good range of eligible properties available to buyers across the country.

“While the real test will be how the scheme works in practice, support such as this is vital in turning homeownership ambition into reality. While not announced as part of the Budget, the same is true for the increase in income caps for Shared Ownership which is something that has long been called for to enable such an important scheme to have the greatest impact.

“To realise the full potential of housing as a driver of economic growth, we need to create options such as this – not only does it open up homeownership to more people, but it’s a real driver for new build supply and development.”

Shanika Amarasekara MBE, Chief Executive of the Finance & Leasing Association, said “The real test of this Budget is not simply how much public money the Government commits, but how much private investment it unlocks. We welcome the Chancellor’s recognition of the pressures facing households and businesses, and the importance of strengthening investment and economic growth.

“The additional £20.4 billion of capital for the British Business Bank and National Wealth Fund represents a significant opportunity. But its success will depend on how effectively Government works with the private finance providers already supporting businesses across the UK. Every day, FLA members finance the machinery, equipment, vehicles and technology that businesses need to invest, become more productive and create jobs.

“Public finance should be a catalyst for private investment, not a substitute for it. We want to see specialist asset finance providers playing a central role in delivering the Government’s ambitions, particularly through the expanded Growth Guarantee Scheme and initiatives designed to support regional growth and investment.

“At the same time, the decision to increase the Bank Corporation Tax Surcharge highlights the need to consider the cumulative impact of taxation and regulation on the finance market.

“We recognise the difficult fiscal choices facing the Chancellor. But if the Government wants lenders to support more investment, it must ensure that the overall policy framework encourages competition, confidence and the availability of finance. The Budget’s measures to support household finances and address energy costs are also welcome.

“However, improving living standards requires more than immediate financial relief. It means enabling people to make investments that improve their lives, whether that is accessing a reliable vehicle to get to work, replacing essential household goods or making their homes more energy efficient. If business finance helps create economic opportunity, consumer finance helps people access it. Both are essential to delivering growth that benefits households and communities across the UK.

“We also want to see a stable and predictable approach to the transition to electric vehicles, ensuring that taxation and other policy measures support consumer confidence and affordable mobility.

“The FLA will continue working with Government to ensure that the UK’s finance market can make its full contribution to investment, productivity and sustainable economic growth. The ambition now must be to turn the announcements in today’s Budget into investment in the real economy.”

Rachel Duffey, CEO, PayPlan said “PayPlan welcomes the Chancellor’s focus on the cost of living. But the Budget must look beyond the headline economic figures and recognise the very real pressure of debt which is being felt by people at an earlier time in their adult lives than ever before. 

“With inflation rising to 3.5%, the highest level in a year, there aren’t many UK households who aren’t being affected. For people whose budgets are already stretched, even relatively small increases in everyday costs such as fuel, travel and household essentials can make it even harder to stay on top of finances.

“Our latest research shows that the people coming to PayPlan for debt advice are getting younger, while the debts they are carrying are increasing. Since 2021, the average age of our customers has fallen from 41.7 to 40.5, while the average debt of those who have sought advice from us has increased by almost 20% to more than £23,000. We’re seeing this trend play out differently across the UK. In Scotland, the average age of customers seeking support has fallen by almost four years to 40. In Northern Ireland, we’re also seeing a younger customer profile alongside debt increasing by more than 22% in the past five years, while in the West Midlands average debt has risen by more than 32% – the largest increase of any region over the time period.

“Increasingly we’re seeing people seek support who may not fit the traditional stereotype of someone struggling with debt. Many are in work, own their home or have previously managed their finances comfortably, but rising costs and a change in circumstances can quickly leave people in financial difficulty.

“Alongside measures to ease the cost of essentials, we’d like Government to play its part in breaking down the stigma around debt and help ensure people know that free, confidential debt advice is available. The earlier someone seeks support, the more options they are likely to have to get their finances back on track and avoid their situation becoming more severe. Government should also continue efforts to create a fairer debt system that supports affordable, sustainable repayment, giving people a clear pathway to deal with their debts while maintaining essential living costs.”

Adam Rolfe, Policy and Public Affairs Officer at Money Wellness said “There’s some welcome help for struggling households in this Budget. The £100 payment for homes in council tax bands A to D will go straight into people’s bank accounts, so they won’t have to apply for it, and that matters when bills are going up in January. But for many of the people we help, it won’t close the gap between what’s coming in and what’s going out.

“The average amount owed by households seeking debt support has gone up by more than a quarter in the last year to £15,319. They’re also £124 a month short of covering their essential bills, compared with just £4 a year ago. So a £100 payment won’t even cover one month’s shortfall.

“When more is going out than coming in every month, people have no choice but to rely on credit, fall behind on bills or use up whatever savings they have left. And every month that goes on, the debt gets harder to climb out of.

“Scrapping the gas standing charge would make a real difference to people on prepayment meters. Many ration their gas to make their credit last until payday, but the standing charge comes out every day whether they use any gas or not. So their credit runs out anyway and the gas goes off. Then when they top up, part of that money goes straight on the standing charges that built up while they were cut off. We hear this from people all the time, and it means families going without heating and hot water even after they’ve cut back as far as they can.

“The next few months are going to be really tough. Energy bills are expected to rise in January, just after the cost of Christmas, and many households are already relying on credit to get by. Today’s help is a start, but the government needs to do much more to stop more families falling into debt this winter.”

Richard Pinch, Senior Director at Broadstone said “The prospect of rising mortgage rates, combined with borrowers rolling off cheaper fixed-rate deals, presents a growing challenge for households and lenders given sustained affordability pressures.

“As mortgage repayments are expected to account for their highest share of household disposable income since 2009, borrowers will face an increasingly challenging financial environment as they refinance onto more expensive deals.

“While mortgage portfolios have remained relatively resilient, lenders cannot afford to be complacent to the potential for higher credit risk across mortgage portfolios. Robust affordability assessments, proactive monitoring of borrowers showing signs of financial stress and forward-looking portfolio stress testing will be critical to identifying emerging vulnerabilities and managing potential increases in arrears and defaults.”