Reagan, Keynes, Question Time and tax cuts

I was on the panel of BBC Question Time this evening, in Leicester. Ed Balls’ tricksy 10p tax proposal was raised, and I raised my reservation: it does very little for the low-paid. Balls says £2 a week, but Policy Exchange showed earlier how benefit withdrawal makes this a derisory 67p a week. And  this is the best the Labour Party could do to help the low paid? There should, I suggested, be a significant tax cut for the low-paid. That is to say: the equivalent of one extra month’s salary a year. So how, David Dimbleby asked, would this be funded? Any which way, I replied: it could be by finding greater savings in the still-gargantuan government budget. And, if needs be, by temporarily extending the deficit. There followed the immediate accusation that I was a Keynesian.

To me, it’s basic economics: if you cut taxes enough, the economy will grow in response.