The UK Budget marks a shift in the government's approach to energy, moving the focus from building clean power to bringing costs down. With conflict in the Middle East pushing up bills for households and businesses, the Chancellor has paired immediate relief with longer-term reforms intended to make cheap electricity the engine of reindustrialisation and energy security.
Among the most notable changes, gas standing charges, the fixed daily fee households pay simply to be connected to the gas grid, will be abolished as part of measures due from 2027 onwards. The government has said the change will come with targeted mitigations to ensure it is delivered fairly, a sign that the cost will need to be recovered elsewhere and that some households could pay more as a result. Electricity standing charges will be reformed rather than scrapped, with details due next year.
More immediate relief is aimed at household bills. The VAT cut on electricity has been extended to July 2027, which is expected to take around £50 off the annual Ofgem price cap in April 2027. A £2.6 billion Household Energy Payment will put £100 directly into the bank accounts of up to 20 million households in England in council tax bands A to D from January 2027, with devolved governments receiving their share. It will be funded in part by a temporary rise in the Bank Corporation Tax Surcharge from 3% to 6% for 15 months. Motorists also keep the 5p fuel duty cut and freeze until July 2027, alongside the HGV road tax holiday.
The longer-term measures are built around controlling what goes onto bills. No new policy costs will be added until a Cost Control Framework is in place at the 2027 spending review, setting budgets for components of energy costs, including policy costs. New generation will only be procured where it lowers bills, benefits the system and can be accommodated by the grid. A consultation on wholesale Contracts for Difference sets out how fixing the price paid to some renewable projects could shield consumers from volatile gas prices. The planned Gas Shipper Obligation, a new tax on gas bills to fund hydrogen projects, has been scrapped, with government picking up those costs instead.
Industry is also in line for support. From April 2027, around 10,000 energy intensive manufacturers will receive a 20 to 25% electricity discount through the British Industrial Competitiveness Scheme, backdated to cover 2026-27. A new Energy Debt Circuit Breaker, meanwhile, is expected to save all billpayers around £30 by 2030.
The emphasis is telling. Clean power is presented less as a goal in itself and more as a route to cheaper electricity, with the government arguing that lower prices will drive electrification and, through it, decarbonisation. Yet the extended fuel duty cut keeps petrol and diesel cheaper, while abolishing gas standing charges removes a fixed cost of staying on gas. How that sits alongside the push to electrify is a question the 10 Year Plan will need to answer.