Do we need a GCSE in Economics?

23 March 2011

Danny Alexander, Chief Secretary to the Treasury, has insulted the Shadow Chief Secretary to the Treasury by suggesting she needs to do a GCSE in Economics.

In a debate on Newsnight on the day of Chancellor George Osborne’s Budget, Jeremy Paxman put to Danny Alexander the argument that the tax on North Sea oil will be passed on to the consumer to neutralise the 1p reduction in the price of fuel announced in the Budget.  Alexander responded that this was “nonsense” and he explained that as oil is a global market, it will not affect the domestic market in fuel at the pump.  When Angela Eagle, M.P., expressed her suprise at this, Alexander told her: “The idea that this is somehow going to be passed on at the pump is just nonsense.  You should retake your GSCE Economics if you think that that’s what’s going to happen.”

Later the same evening, Gordon Brewer on Newsnight Scotland put this point to David Bell, Professor of Economics at Stirling University, who contradicted Danny Alexander by saying that it was not as simple as this.

The next day, George Osborne said that he will watch the oil industry like a hawk to see that they do not pass on the new industry tax to motorists.  If Danny Alexander is correct, then the Chancellor would not need to play such close, hawkish attention to the oil industry.  So it is not as obvious as Danny Alexander asserts.

Alex Salmond said that fuel could have been reduced by 5p and that if the SNP had the power, he would reduce it by 50p.  Whatever may be the economic realities of such a reckless off-hand comment, the Chancellor’s cancellation of the fuel duty escalator for the rest of this Parliament confirms the Scottish Christian Party’s opinion that the best way to tackle fuel inflation is domestically through our own Budget, rather than by Danny Alexander’s chasing around Europe to beg European ministers for a special favour to reduce fuel prices for island communities.

Labour also complained that the 1p reduction in fuel was offset by the 3p increase in VAT in January.  However Labour failed to point out that no party except the Scottish Christian Party was open enough about the need to increase VAT in their Manifesto prior to the General Election in May 2010.  David Cameron even said that increasing VAT was not fair, then promptly did so.