Energy Bills Could Be Lowered for Low-Income Households Under Treasury’s Cost of Living Plan

Millions of UK households could see their energy bills reduced under new plans being considered by the Treasury to ease the cost of living crisis. Reports suggest that ministers are examining ways to cut or scrap daily standing charges on gas and electricity bills, which hit low-income households hardest.

Standing charges are the fixed daily fees applied to energy accounts, regardless of usage. They cover the cost of maintaining the network and supplying energy to homes. At present, households pay around £196 per year for electricity and £124 per year for gas in standing charges alone. For families that use little energy, these fixed costs can make up a disproportionate share of their bills.

Treasury reviews standing charges

According to government sources, the Treasury is looking at a package of measures ahead of the Autumn Budget. Among the options is a significant reduction in standing charges, which could benefit millions of low-use or vulnerable households.

Ofgem has been reviewing the system since 2023 and has proposed that suppliers be required to offer low or no standing charge tariffs by early 2026. The Treasury is now understood to be considering bringing forward changes sooner, as pressure mounts from MPs and campaigners.

Consumer champion Martin Lewis has repeatedly highlighted the unfairness of the current system, arguing that standing charges penalise those on the lowest incomes. Labour MPs in the Living Standards Coalition have also urged ministers to act, warning that without reform, families already struggling with high food and housing costs could be pushed deeper into debt.

What a reduction would mean

Cutting standing charges could save the average household around £100 a year. However, energy suppliers have warned that removing or lowering the fees could lead to higher unit rates for electricity and gas. This could mean that heavier users of energy pay more, while lighter users benefit.

Suppliers argue that standing charges ensure stability in the system, covering the cost of maintaining the grid and supporting vulnerable customers. But critics counter that a flat-rate system is inherently regressive, charging the same amount to households regardless of income or consumption.

What households can do now

While policy decisions remain uncertain, households are being urged not to wait for government reforms to lower their bills. Using free online tools to compare energy prices can highlight which suppliers offer the lowest tariffs today.

Some providers already structure their tariffs in ways that are fairer for low-use households, while others may offer competitive fixed deals that protect against further increases. The best option depends on each household’s circumstances, usage, and location.

It is also important to remember that regional differences in pricing remain significant. Unit rates and standing charges can vary widely across the UK, making it even more important for households to carry out regular energy price comparison checks.

Support and consumer awareness

Campaigners stress that awareness is key. Many households either do not understand standing charges or do not realise that switching to a different tariff could reduce their bills. With energy prices still well above pre-crisis levels, even modest changes can have a major impact over the course of a year.

The government has also faced calls to consider other measures, such as cutting VAT on domestic energy bills from 5% to zero. However, critics argue this would disproportionately benefit higher earners with bigger homes, whereas standing charge reform would deliver fairer savings to lower-income households.

The bigger picture

Wholesale gas prices remain around 75% higher than they were before the energy crisis began in 2021. While prices have stabilised in recent months, volatility remains, and many analysts expect costs to climb again during the winter.

For now, households are advised to stay informed, compare tariffs regularly, and check eligibility for support schemes such as the Warm Home Discount.

The takeaway

The Treasury’s review of standing charges could reshape how energy bills are structured in the UK, with the potential to bring real relief to low-income families. But until decisions are confirmed, households should take action themselves.

By using tools to compare energy prices and carrying out regular energy price comparison checks, consumers can ensure they are not paying more than necessary. For practical guidance and access to the latest tariffs, Free Price Compare remains a trusted resource for UK households.