Britain could borrow nearly £65 billion more than planned in the next couple of years as new finance minister Philip Hammond seeks to 'reset' government budget policy to ease the shock of last month's vote to leave the European Union. Jo Webster reports.
Resetting budget policy ...with a 65 billion pound I-O-U. Britain's new Chancellor - Philip 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 Reuters Senior UK economics correspondent. SOUNDBITE (English) DAVID MILLIKEN, REUTERS SENIOR UK ECONOMICS CORRESPONDENT, SAYING: "After Britain has voted to leave the EU lots of economists, the International Monetary fund, the Bank of England all think Britain's economy is going to slow and that's bad news for 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 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. 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. SOUNDBITE (English) DAVID MILLIKEN, REUTERS SENIOR UK ECONOMICS CORRESPONDENT, SAYING: "It's going to be a difficult decision for him. A lot of the economic arguments say long term investment and that's what the office for budget responsibility reckons gets the biggest bang for the buck, that 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 in the 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.