John Healey MP used Budget 2026 to announce measures to cut household energy bills, including scrapping standing charges on gas bills for 23m homes. He said the budget was "an honour to deliver a budget as chancellor" and set out the change alongside new support for lower-income households.
The gas-bill move is meant to save two-thirds of households an average of £45 a year. The government will also pay £100 directly into bank accounts for 20m households in council tax bands A to D, at a total cost of £2.6bn.
Budget 2026 energy measures
Healey said fiscal discipline was his first priority as chancellor, even as the budget included direct relief on energy bills. He also said, "Labour’s priority is cheaper energy," and announced plans to scrap a levy on bills that funds hydrogen while moving older renewables onto fixed-price contracts.
He added that the government would extend a VAT cut through the winter and spring to July, taking £50 off the annual price cap. For households facing the standing charge change, the practical effect is simple: the fixed daily gas charge should disappear, leaving bills driven more by actual use than by a routine fee.
Rachel Reeves and fiscal rules
Healey paid tribute to Rachel Reeves’s fiscal discipline during the speech and said the UK did not want the war in Iran, which he said had driven up costs for British families through higher energy costs and higher interest rates. He said the UK would spend £14bn more on debt interest this year.
He also said the government would meet the fiscal rule that day-to-day spending must be covered by tax receipts and the investment rule that government debt must be falling as a percentage of GDP in the third year of the forecast. The Office for Budget Responsibility said the government would have £15bn of headroom in 2029-30 and £20bn in 2030-31.
Office for Budget Responsibility forecasts
The Office for Budget Responsibility said government borrowing would be 4.2% of GDP this year and 3.4% next year, before falling to 2.9%, 2.1% and 1.8% by 2030-31. It also said GDP would grow by 1.2% this year, 1% next year, 1.6% in 2028, 1.8% in 2029, 1.7% in 2030 and 1.6% in 2031.
In March, the Office for Budget Responsibility had predicted GDP growth of 1.1% in 2026, rising to 1.6% in 2027 and 2028, and dropping to 1.5% in 2029 and 2030. It said government debt would be 83.2% of GDP this year, 83.8% next year, then 83.1%, 82.3% and 81.7% in the following years.
For households, the immediate takeaway is the scale of the relief rather than the machinery behind it: 23m homes are in line for the gas standing-charge change, and 20m households will get the £100 payment into their bank accounts. The speech set out the money and the rules, and left the billing changes to be carried through from there.
