Healey's £2.6billion winter warmer: Chancellor to give 20 million households £100 handout towards energy bills

John Healey unveiled plans to hand 20million households £100 towards their energy bills as he tried to fend off claims he is ignoring the plight of Britain's squeezed middle. The Chancellor said he would spend £2.6billion on the handout for people living in properties in council tax bands A to D as he presented his first Budget . It will be paid for by a 3 per cent increase in the bank profits tax for 15 months from January. Treasury sources said the move would cover 83 per cent of 'fuel stressed' households.

The government's online council tax checker crashed this afternoon in the wake of the announcement. The measure echoes the £9.1billion Energy Bills Rebate introduced by former Conservative prime minister Rishi Sunak in February 2022 after the start of the war in Ukraine sent prices soaring. Mr Healey also revealed that a VAT holiday on electricity bills introduced when he took over in No11 earlier this year would be extended to July. Ahead of his debut fiscal showpiece, billed as providing 'breathing space', the Chancellor this morning confirmed that standing charges on gas bills will be scrapped for around 23million homes, although not before next year.

But he faced criticism that it would do little to help with costs this winter. The Chancellor said he would spend £2.6billion on the handout for people living in properties in council tax bands A to D as he presented his first Budget Your browser does not support iframes. Mr Healey, who replaced Rachel Reeves earlier this year, said he wanted to dramatically change the UK energy market to help bring down costs for hard-pressed families.

But he used the Budget to reiterate the Government's support for hitting Net Zero by 2050, saying 'clean power' would be at the heart of his cost-cutting plans. 'Let me say this to families at home. I know that with the conflict in the Middle East, rising energy bills are a real worry,' he told MPs. 'I know that people look to Government at times like this, not to solve all their problems, but to give them a bit of breathing space. 'So today I'm taking one further step.

This winter, for 20million households in council tax bands A to D, I am announcing a £100 energy payment for households, paid directly into people's bank accounts to deal with rising energy bills. 'That's a £2.6billion scheme to take the pressure off in the coldest months and see people through to the spring.' The gas standing charges are a fixed daily fee added to bills, regardless of how much gas a customer uses, and cost around £108 per year for a typical household.

The Treasury said Mr Healey will ask regulator Ofgem to remove standing charges 'in 2027 or as soon as possible after' in a move that could save 60 per cent of families £45 a year. MoneySavingExpert founder Martin Lewis, who met the Chancellor in No11 this morning, said that despite the 'moral hazard' charge being removed, four in ten households faced paying more as their unit rate was increased But ahead of the Budget, MoneySavingExpert founder Martin Lewis , who met the Chancellor in No11 this morning, said that despite the 'moral hazard' charge being removed, four in ten households faced paying more as their unit rate was increased.

Other experts have also pointed out that the change could hammer pensioners and those with large families who use more heating. Dhara Vyas, chief executive of Energy UK which represents firms, also welcomed the move as 'good news' for many customers but warned it would be important to support those low-income households who could otherwise lose out. Tory energy spokesman Andrew Bowie said: 'Next week in large parts of the UK, the temperature is going to get close to freezing.

Because of these changes, if you live there and heat your home with gas and want to turn on the central heating… Labour just made your life much more difficult and far more expensive.' At the same time, Mr Healey has set aside £5.5billion to uprate benefits paid to ten million people by 3.5 per cent, in line with inflation. Major welfare reforms have been delayed until later in the Parliament. Richard Neudegg, director of regulation at Uswitch.com, said: 'Based on current rates, a household using 7,000 kWh of gas a year could be about £40 better off under these changes, while a home using 14,000 kWh could be £25 worse off. 'A household using the typical 11,500 kWh shouldn't see any change in what they pay.'

Your browser does not support iframes. Household energy bills rose in October with a 4 per cent hike to Ofgem's energy price cap and forecasters have warned they could soar by almost another £300 from January. Cornwall Insight's latest forecast predicts the price cap will rise by a further 16 per cent to £1,999 a year on January 1, up by £276 on the level between October and December and the biggest rise since January 2023. In an effort to help households, the Government has temporarily removed the 5 per cent VAT from electricity bills until March 31 next year to cut around £45 a year.

Households are still paying 5 per cent VAT for gas. Mr Burnham told the Commons last week that he had asked Mr Healey and Energy Secretary Miatta Fahnbulleh to examine abolishing standing charges. The fee does not pay for the energy itself but covers the cost of delivering gas and electricity to homes and businesses – including the cost of essential maintenance and infrastructure upgrades. Concerns have been raised that some low-income consumers who use large amounts of energy could be left worse off if the costs simply move to the unit rate part of the gas bill.

The Treasury said ministers will 'set out in due course targeted mitigation for a small number of households', and that those 'not seeing an automatic saving will still have better control over their bills without the worry of affording the standing charge'. Mr Healey will have limited scope for big giveaways because of stretched public finances, made worse by international market turmoil caused by the Iran war. He is sticking with the fiscal rules set by predecessor Rachel Reeves, requiring day-to-day spending to be financed by taxes rather than borrowing by 2029-30 and that public debt as a share of the economy should fall in the same year.

READ MORE: Government scraps standing charges on gas bills – what will it mean for your energy bills?