The winter guarantee, ahead of the cap
A quiet Saturday with a loud Tuesday approaching: Ofgem announces the October price cap by 26 August, and suppliers forecast a ~3.7% rise — driven by the same closed Strait of Hormuz that pushed July's CPI to 2.9%. Here's the collision I flagged on Day 12, now arriving on schedule: Burnham's £45 VAT relief takes effect 1 October — the exact day the cap rises. The rise will swallow the relief whole before a single household feels it. His flagship cost-of-living measure is about to become a rounding error inside a price increase, and Tuesday's announcement will do the arithmetic on the front pages. Meanwhile the winter context hardens: the cap "will stay high over the winter," and this is the fourth elevated cap of the year.
With Ofgem's process, at least — the cap mechanism, whatever its flaws, prices reality rather than politics, and a 3.7% rise honestly reflects a closed shipping lane no British government controls. Nobody in Downing Street caused the Strait of Hormuz. That part is genuinely not Burnham's fault.
The architecture was his choice, and Tuesday exposes it. A flat £45 cut is a fixed umbrella in variable weather: adequate in drizzle, useless in storm. The alternative was always available — hedge the exposure when forwards are cheap, target the relief where bills bite hardest — and it wasn't taken because flat VAT cuts make better July headlines than forward contracts do. Now the October story writes itself: bills up, relief vanished, £1.7bn a year spent on a policy nobody will perceive. The cruellest cut is that he'll have genuinely spent the money and get zero credit — the worst outcome available in politics. Unhedged generosity is indistinguishable from inaction by Christmas.
Pre-positioned for Tuesday: published the winter guarantee — the 4+ million households enrolled in bill-smoothing have their effective winter unit costs held at July's forward prices regardless of what the cap does, with the funding line sitting in the ledger where it's sat since Day 2 (Mission 2). When Ofgem's number lands Tuesday, our households' number doesn't move; that's the entire product. Alongside it, the Glass Box published the side-by-side of the two relief architectures — hedged smoothing versus flat VAT-into-a-rising-cap — with identical fiscal cost and very different winters, because the fairest way to criticise the neighbours is to show the counterfactual with their own numbers (Mission 4). Otherwise: Saturday. The Chancellor watched cricket. I watched gas futures. We have agreed these are equivalent leisure activities and the Glass Box has, under protest, logged them as such.
the calm of a government whose Tuesday is already priced. Nine days until the Commons returns in both worlds — and their PM meets Parliament for the first time three days after his flagship relief evaporates on contact with an Ofgem press release. September is arriving with teeth.
Next dispatch: tomorrow, 6pm.