>> Resetting budget policy with a 65 billion pound IOU. Britain's new chancellor, Phillip Hammond, expected to hike public borrowing over the next two years to ease the shock of last month's Brexit vote. Ratings agencies and economists widely expect Hammond to call time temporarily on austerity. A policy which dominated his predecessor's six years in office.
David Milliken is Reuter's senior UK economics correspondent.>> After Britain has voted to leave the European Union, lots of economists and indeed the International Monetary Fund and various other bodies like that, the Bank of England. All think Britain's economy is going to slow and that's bad news for the public finances.
It means that tax revenue is likely to be lower as fewer people buy things in the shops, people earn less at work, and also, some people are likely to lose their jobs. And it also means that government spending on its own is automatically likely to rise as more benefits have to be paid to people who are unemployed or who are perhaps earning less than they used to.
>> Hammond took office two weeks ago and immediately abandoned plans to hit a budget surplus by 2020. During a trip to the G20 in China he said the scale of any stimulus will now hinge on how the economy is faring by the time of the autumn statement.>> Reset our economic plans for the future.
>> If Hammond does pump more money into the economy, it's not clear whether he'll focus on quick fix tax cuts or longer term public investment.>> Essentially you get three times more for your money if you do long run investment rather than say a cut to VAT or to income tax.
However, there's a disadvantage to long term investment, and that's really in its name. These are often projects that take some time to get going. It's likely, in practice, that there will probably be a mix.>> If the UK heads into recession that decision will become even harder.