Forty-Eight Hours to May 7 — Rachel Reeves Delivers an Emergency Commons Energy Statement at 12:30pm, Brings Forward a Windfall Mechanism on North Sea Profits at $100, and Defends a Fuel-Duty Cut That Lands at the Forecourt the Day After the Polls Close

The package the Chancellor will set out

The Treasury statement, briefed in detail to lobby reporters at 7:30am Tuesday, contains four measures. First, the Energy Profits Levy on North Sea producers will be amended so that the windfall rate steps up at $100 a barrel of Brent, with proceeds ring-fenced for the Warm Home Discount expansion announced at the Spring Budget. Second, fuel duty will be cut by one penny per litre from 6:00am Saturday, May 9. Third, HGV operators will be granted a fifteen-day deferral on April road fuel duty payments. Fourth, the Treasury will guarantee a wholesale gas price ceiling for industrial users in the ceramics, glass and steel sectors for ninety days. The package is, in the language of one Number 11 official Tuesday morning, “the largest peacetime intervention in domestic energy markets since the 1973 oil crisis.”

The political envelope is Thursday and the forecourt arithmetic is the day after. The fuel-duty cut, announced Sunday and timed to land Saturday, will not change the petrol pump price the voter sees on the way to the polling station on Thursday. The forecourt this morning is showing diesel at 195.7 pence and petrol at 188.4 pence, both within a penny of the all-time record set in March 2022. Reform’s Sun front-page line, briefed at 6:00pm Monday, was that the Chancellor is asking voters who paid 196 pence on Saturday to thank her for 195 pence on the Saturday after the elections. The Conservatives, briefing at 8:00am Tuesday, called the package “an electoral apology dressed up as an emergency.”

The political reading inside Number 10

The package was redrafted twice between 9:00pm Monday and 6:00am Tuesday after the Fujairah strike re-priced the policy headroom in real time. The first draft, signed off by the Prime Minister at 7:00pm Monday, did not include the wholesale gas price ceiling for industrial users; that measure was added at 11:30pm after a call between the Chancellor and the chief executive of British Steel. The HGV deferral was added at 2:00am after a Road Haulage Association readout warned that twenty-one operators were considering a Wednesday wildcat action over April pump prices. The Treasury’s wholesale judgment on the windfall mechanism was confirmed at 5:00am after Brent printed $115.20 in Singapore.

The Prime Minister’s political team have, on the Treasury's reading, accepted that no version of the package will move the dial on the YouGov MRP’s eight-point Reform lead. What the package is designed to do is give Labour candidates in counties Labour has held since 1997 something to say at the door on Wednesday morning. The cabinet papers circulated at 5:30am Tuesday described the statement as “the centrepiece of the Wednesday line.” That phrasing — a Tuesday statement designed for the Wednesday news cycle ahead of a Thursday vote — is the political envelope the Chancellor will be defending at the despatch box at 12:30pm.

The Opposition response and the Labour rebellion

Mel Stride, the Shadow Chancellor, will respond from the Opposition front bench. The Conservative line, briefed at 8:30am, will press the Chancellor on three questions: why the windfall trigger is set at $100 rather than at the $86 a barrel implied by the OBR’s November forecast, why the fuel-duty cut lands on Saturday rather than on Wednesday, and why the wholesale gas ceiling for industrial users does not extend to households. Reform’s Richard Tice will follow with the Sun-front-page line. The SNP’s Westminster leader Stephen Flynn will press the Chancellor on whether any of the measures applies to North Sea decommissioning. The Liberal Democrat spokesperson Sarah Olney will press on the absence of a windfall on bank profits.

The political risk to the Chancellor is on her own benches. Twenty-two Labour MPs in the soft-left Tribune group circulated a private letter at 11:00pm Monday calling for the windfall to be set at $86 rather than $100. The letter, reported by the Guardian at 7:00am Tuesday, did not threaten a vote against any future measure but did call for the Chancellor to give “a full account at the despatch box of the modelling that produced the $100 figure.” The Treasury’s answer, briefed at 8:30am, is that the OBR’s reference price for the rest of the financial year is the modelling input. Whether that answer will hold the Tribune group through Tuesday afternoon and into the close of polls Thursday is the question the Chancellor cannot answer until the votes are counted.

What happens if Brent goes to $130

The Treasury internal sensitivity table, leaked to the FT at 9:00am Tuesday, models three Brent paths through the rest of the financial year: a base case at $98, a stressed case at $115, and a tail-risk case at $130. The three paths produce three different versions of the November Budget. At $98 the package announced today is sustainable with a residual headroom of £9 billion. At $115 the headroom collapses to zero and the November Budget would need to find £18 billion of new revenue. At $130 the package becomes a fiscal liability of £31 billion and the November Budget becomes a tax-raising event of the kind the manifesto explicitly ruled out. The Goldman Brent path, set Sunday and reaffirmed Monday evening, has $128 as the year-end target with the floor of the new range — not the ceiling — at that level. The Chancellor will not be drawn at the despatch box on the November Budget. The market will price the November Budget regardless.