Break the Link to cut bills, boost the economy and fix energy

Britain’s energy system is a mess. Here’s the thing… we make cheap green energy here at home, but because of this bizarre “link” to global gas prices - the one we’ve been calling out for years - we never see the benefit. Breaking the link is step one to fixing our mad energy system. 

At the centre of it all is an odd auction mechanism that doesn’t pay generators the price they actually bid. Instead, everyone gets paid the price of the highest bidder and that’s usually gas. So we never get the benefit of cheap green energy and the price stability it brings. Until we break this link, we’ll keep getting fleeced.

We all saw what happened in 2022. Gas prices went through the roof - up tenfold at times - and because of this link, the price of every other form of electricity went with it. Our energy bills quadrupled. The government had to step in with £50 billion of public money just to stop the bills sinking people. They saw the problem. We spelled it out. They even gave themselves emergency powers to fix it… but then didn’t use them. They treated the symptom and left the cause untouched.

And so here we are. Still tied to the global price of gas, still paying more than we need to every single day, still handing generators more money than they ask for.

It doesn’t just hit our bills, it hits the whole economy. We asked the National Institute of Economic and Social Research (NIESR) to model what would have happened in 2023 if we’d broken the link. The results, published on the Green Britain Foundation website were jaw dropping.

In that year alone, we would have knocked £43 billion off national energy bills. Businesses would be £30 billion more competitive. Households would save £13 billion. That’s an outrageous level of overpayment - but it doesn’t stop there.

NIESR found that breaking the link could have dropped inflation by 1.5 percentage points. That would have led to lower Bank of England rates by 0.7 points, higher growth by 0.5 points and a £36 billion boost to GDP. Every Brit would have been £300 better off; not just in that year, but for several years after.

This is a chain reaction: higher energy prices push up inflation, which pushes up interest rates, which pushes up mortgages, pay bargaining, borrowing, the whole cost-of-living spiral. Breaking the link could have lifted a million people out of poverty in that year alone. That’s the scale of the damage being caused by one unnecessary market rule.

And even in a year like this one, when gas prices are low, the gains are still big. We’d cut inflation by 0.3 points, nudge lending rates down by 0.1, raise GDP by 0.4 per cent or £9 billion, around £180 per household. For doing something we should have done yesterday.

So why hasn’t it happened? Honestly… no idea.

We’ve been banging on about it for years, sharing all the analysis with DESNZ and now the Treasury. The economic case is rock solid, yet the answer we get is basically: “too difficult.” That’s never been a good reason not to do the right thing. And it’s not even true; we’ve published a full roadmap showing how to do it within the existing rules.

But there’s another way. The government already has emergency powers to do this. They gave themselves those powers for exactly this purpose. If that’s not enough, pass new ones. We ARE in an emergency: a cost-of-living emergency, a poverty emergency, and this weird market link is fuelling the fire.

What I’ve never heard, from anyone, is a justification for keeping it. Not one reason why we need it. Not one explanation of its purpose. Because there isn’t one.

We need to reform our energy market, urgently. Breaking the link is just one of three proven steps we’ve mapped out. Together, they could halve bills, drive down inflation and interest rates, shrink the cost of living crisis and cut poverty all at the same time. It’s all there at Babelfish.news.

Time to fix this…:)