• Nesta outlines how the UK government under Andy Burnham could offer financial relief to millions of households by cutting electricity bills.
• The research and innovation foundation calls for the government to abolish the gas standing charge on the back of analysis showing that moving costs into unit rates would save typical dual fuel households £22 per year and leave 63% of dual fuel households better off.
• Analysis shows that combining the gas standing charge reform with removing legacy levies, dropping electricity VAT to zero and forgiving electricity debt, would save households £130 per year in total and push electricity-to-gas price ratio to a historic low of 2.73 - making heat pumps cheaper than gas boilers.

London, UK - The UK government under the next Prime Minister should abolish the standing charge for gas as the first step in cutting energy bills by around £130 a year for millions of people, Nesta has said today.

The research and innovation foundation Nesta has published new analysis showing that UK households could save around £130 a year in if the government puts in place four complementary measures that target the structural imbalances in UK energy bills:

1. Abolish the gas standing charge (saving £22 per year): Shifting fixed daily fees onto gas unit rates would see bills fall for 84% of the poorest households, as wealthier households use disproportionately more gas.
2. Remove remaining electricity levies (saving £42 per year): Shifting the remaining costs of the legacy Renewables Obligation (RO) and Feed-in Tariffs (FiT) onto general taxation.
3. Reduce VAT on electricity to zero (saving £41 per year): Eliminating the 5% VAT rate on domestic electricity bills to actively encourage household electrification.
4. Forgive historic electricity debt (saving £29 per year): An exceptional, one-off intervention to wipe out £2.7 billion of socialised electricity bill debt that is currently paid by all consumers through their bills.

Together, these measures would cost the Treasury £3.2 billion per year, alongside a one-off £2.7 billion cost to clear the electricity debt. For comparison, the UK government spent £3.7 billion on private consultants in 2024/25, according to research from the company Tussell published this year.

It has been reported that new MP Andy Burnham is preparing to unveil a package of cost of living measures within his first fortnight as Prime Minister, after succeeding Keir Starmer, including interventions on energy bills. Nesta is calling for reforms to lower the cost of electricity to be part of this.

Andrew Sissons, director in sustainable future at Nesta, said: “Andy Burnham is entirely right to call for decarbonisation that permanently lowers people’s energy costs. Giving people breathing space on their household budgets can go hand-in-hand with commitments to reduce reliance on fossil fuels, if the next Prime Minister fixes the structural flaws that penalise people who want to switch their systems to heating and cooling using clean electricity.

"For years, legacy policy costs have been heavily loaded onto electricity bills, making clean heating options artificially expensive. By combining a zero-taxpayer-cost reform of the gas standing charge with these targeted tariff cuts, the government can deliver around £130 a year in immediate financial relief for the majority of UK households, while making clean heating the cheapest option on the market."

The high cost of electricity relative to gas, sometimes referred to as the ‘spark gap’, remains the one of the biggest barriers to the UK's home decarbonisation goals. Home heating is currently responsible for 14% of the UK’s total carbon emissions, with emissions remaining stubbornly close to their 1990s peak. Reducing this to meet the government’s targets will require a large-scale transition from fossil-fuel gas boilers to low-carbon alternatives like heat pumps - which run on electricity.

While the running costs of a heat pump are equal to a gas boiler at an electricity-to-gas price ratio of 3.3, households paying for their own installations need the ratio to drop to 2.9 or lower to reach "lifetime cost parity". The current ratio is 3.56, for the energy price cap from July to September 2026.

Nesta has highlighted that research commissioned by Ofgem shows that standing charges are highly unpopular with the public. The research found that 61% of people view standing charges as unfair because they penalise low-energy users, with over half of respondents supporting an increase in unit rates if it meant standing charges were reduced or abolished entirely. Shifting these fixed costs onto variable gas unit rates also increases the financial return on home insulation and energy efficiency upgrades, giving households more control over their bills.

Energy debt levels in the UK are at an all-time high. At the end of March 2026 energy debts reached a record £4.8 billion, according to Ofgem’s figures. Electricity debt is higher than gas debt, with average electricity debt of £1,876 compared to £1,623 on average for gas for households where there is no arrangement to repay the debt. Energy suppliers incur debt-related costs, through the money they spend trying to recover unpaid bills and because of the negative impact on their own cash or debt position. The cost to suppliers is then passed onto consumers through their energy bills, leading to higher energy bills for all customers - which means debt forgiveness also lowers bills for all consumers.

Nesta’s four proposed measures to reduce energy bills in full are:

Notes to editors

1. Nesta has today published three policy options papers: Establish a price ratio target, Introduce a gas price stabiliser and Abolish the gas standing charge.
2. Figures are modeled using Ofgem price cap for July to September 2026.
3. For more information on the analysis or to speak to one of the experts involved, please contact Kieran Lowe, Senior Media Manager, on 020 7438 2576 or [email protected]. Spokespeople are available for broadcast interviews.

About Nesta

Nesta is a research and innovation foundation that designs, tests and scales solutions for the biggest challenges of our time.

Driven by a vision to improve the lives of millions of people, our focus up to 2030 is on three missions: breaking the link between family background and life chances, halving obesity and cutting household carbon emissions.

We work with partners to develop high-potential solutions and test them as they evolve, drawing on expertise in qualitative and quantitative research, data science, behavioural science and design.

Once confident in the effectiveness of a solution, we take it to scale. We create national policy proposals, develop consumer-facing products and services, build and spin out commercial ventures and harness the power of the arts.

We work with two specialised units: BIT applies a deep understanding of human behaviour to help clients achieve their goals. Challenge Works designs and runs challenge prizes to spark innovation in science, technology and society. Find out more at nesta.org.uk