Chancellor to review gas standing charges as PM defends drilling plans

Chancellor John Healey is set to examine the removal of standing charges from gas bills, a move the Prime Minister has described as part of a broader effort to reduce household energy costs. Andy Burnham announced in the House of Commons that he has requested the Chancellor and Energy Secretary Miatta Fahnbulleh to consider stripping what he termed unfair fixed fees from consumer bills. Standing charges are daily amounts applied by gas providers that remain constant regardless of usage levels. The average cost in the United Kingdom is approximately 30p per day, equating to roughly £103.32 annually. These fees cover infrastructure and operational expenses, with the regulator Ofgem setting regional caps to account for varying supply costs.

The Prime Minister stated that the government intends to address the additional financial burdens facing British households, although he did not elaborate on the specific criteria for deeming these charges unfair. This political commitment follows the government’s recent approval of further gas drilling at the Jackdaw site. The project is expected to begin supplying up to six per cent of the country’s gas requirements by the end of the month. Burnham emphasised that the Treasury and the Department for Energy Security and Net Zero are working jointly to ensure that the National Wealth Fund establishes a new division, the Energy Wealth Fund. This new arm will reinvest £2bn of oil and gas revenue into renewable energy sources, with detailed costings for the additional investment to be presented at the upcoming Budget.

Despite the new drilling approval, the Prime Minister reaffirmed the Labour manifesto pledge to refrain from issuing new licences for oil and gas extraction. The Jackdaw project was originally approved by the previous Conservative government in 2022 but faced significant legal challenges before the current Energy Secretary made a final decision. Neil Shearing of Capital Economics suggested that the new drilling site is unlikely to have a material impact on the wider UK economy, though it may slightly improve energy security and exports. He noted that more substantial economic changes would likely require a shift in the government’s stance on new licensing. Meanwhile, Conservative leader Kemi Badenoch challenged the Prime Minister to clarify whether welfare spending cuts are under consideration. Burnham responded by stating that he did not want to see young adults on benefits, referencing the nearly one million people currently out of employment, education or training. He asserted that the fundamentals of the British economy are strengthening under the current administration and urged the opposition to await the Budget for details on long-term fiscal decisions.