The last day of the parliamentary session before the summer recess normally marks the period when the Treasury starts to wind down for the summer. The chancellor takes a break and a skeleton team takes control. But not this year.

Seated next to Boris Johnson as he made his first statement to MPs last Thursday was Sajid Javid, the new chancellor of the exchequer, and the man given the task of delivering the prime minister’s tax and spending pledges this autumn.

This is a big responsibility for Javid, who has spent his first days in the Treasury running through options with officials. The chancellor is aware of what the prime minister expects of him – a break with the austerity of the past decade – and there is money available, even if that means higher public borrowing. The only question now is how and when to spend it.

Theresa May had used the promise of higher spending after Brexit as a carrot to win backing for her deal, but failed. According to observers, Johnson appears to be doing two things: revving up the economy to gain support for his plans with a fallback that more spending could cushion the fallout of a no-deal departure.

Matthew Whittaker, the deputy chief executive of the Resolution Foundation thinktank, said: “May came in saying her job was to deliver Brexit, which was hard to be judged against. It’s a difficult thing, and a pretty gloomy one.”

Referring to Johnson’s upbeat statements about Brexit since entering Downing Street, he added: “But to say we’re entering a ‘golden age’ and let’s be more confident, let’s leave – and with more teachers in schools and police on the streets – then it becomes easier to say ‘trust me on Brexit’.”

Facebook Twitter Pinterest Sajid Javid knows what the prime minister expects: a break with the austerity of the past decade. Photograph: Aaron Chown/AFP/Getty Images

Like many things about Johnson, the plan mirrors Donald Trump, who cut taxes to boost US growth through a tough trade war with the rest of the world, Whittaker added.

Even before entering No 10, Johnson had made a series of promises while campaigning to be prime minister, some more specific than others. He pledged £1bn to hire 20,000 new police officers and getting on for £5bn to reverse the cuts to schools’ spending since 2015.

On the tax side, he said he wanted to raise the 40% income tax threshold from £50,000 to £80,000 and to raise the level at which workers start paying national insurance contributions (NICs). But, as the Institute for Fiscal Studies thinktank has noted, these are expensive commitments. The income tax promise would cost £9bn a year; NICs changes could come with an £11bn price tag. Javid could go for broke and deliver these massive cuts in one go. More likely he will spread them over several years and make a start in the coming months.

Further pledges have been made in Johnson’s first few days in power, including funding a new trans-Pennine rail route between Leeds and Manchester and a £3.6bn fund for “left behind towns”.

Facebook Twitter Pinterest Boris Johnson appears to be trying to to rev up Britain’s economy. Photograph: WPA Pool/Getty Images

What Javid will do is exploit the space for extra borrowing created by the fiscal rules inherited from Philip Hammond. The previous chancellor said government borrowing should be below 2% of Gross Domestic Product – a measure of the economy’s output - by 2020-21. However, the current level of borrowing is lower than that, at roughly 1.1%. The new government can therefore borrow a bit more – about £26bn – and still meet the rule.

Although framed by Johnson as spending headroom at his disposal, economists say the additional firepower is something of an illusion. Thomas Pugh, of the consultancy Capital Economics, said: “This isn’t money sitting in a savings account waiting to be spent. It’s more like borrowing from an overdraft where the limit is set at 2% of annual income. So spending it would result in a higher deficit and more borrowing.”

The £26bn calculation is based on the strength of the economy in March, when the calculation was last made by the Office for Budget Responsibility (OBR), the government’s tax and spending watchdog. Growth has since slowed to stalling point, with a one in four chance Britain has already fallen into recession. The National Institute of Economic and Social Research (NIESR) warned no-deal Brexit could cause a “severe downturn” and cause public borrowing to rise.

Jagjit Chadha, the director of the NIESR, said: “Pinning down expenditure on the basis of a forecast you know will get revised doesn’t make a lot of sense.”

The OBR has said the new prime minister’s giveaway package “would push government borrowing and debt up from the levels expected in our forecasts and that there is no war chest or pot of money set aside that would make them a free lunch”.

Leaving the EU without a deal would add £30bn a year to borrowing from 2020-21 onwards as the economy plunges into recession, it added.

Since the 1990s, successive governments have set fiscal rules. Gordon Brown had a “golden rule” only to borrow for investment, while George Osborne pledged to eliminate the deficit within five years from 2010, before he failed and moved the goalposts.

The budget deficit – the annual shortfall between government spending and income from tax receipts – has steadily improved since spiking after the financial crisis. It came down from £153bn, or 9.9% of GDP, in 2009-10, to £23.5bn, or 1.1% of GDP, in 2018-19.

However, the national debt pile – which increases with every year of deficit – has risen to more than £1.8tn, or 83.1% of GDP. Economists debate how dangerous this might be, warning it could leave the UK vulnerable to shocks. It remains below some international comparisons, such as Japan, where debt is more than 250% of GDP, and Italy, where it is more than 130%.

Rishi Sunak, Johnson’s new chief secretary to the Treasury, told Sky News on Thursday he wanted to keep a Tory rule that Britain’s total debt pile should fall as a percentage of GDP each year. The OBR estimated that government borrowing could rise by about £25bn per year by 2024 under such a constraint. However, that still assumes economic growth, which crashing out of the EU could imperil.

Johnson turning on the spending taps could have serious consequences for Labour, which was getting used to comfortably outgunning government spending proposals under Jeremy Corbyn, generally to a warm reception.

The fabric of the welfare state has grown frayed from a decade of austerity. Britain suffers from austerity fatigue and is ready for higher spending. Labour, though, is stuck fighting a previous war. Despite economists generally agreeing that austerity was a massive policy mistake, the party has yet to convince voters that it can be trusted with sound financial management.

John McDonnell, the shadow chancellor, promised to match Johnson’s spending increase but doubted the new prime minister would end austerity entirely. “I’ll believe it when I see it,” he said.

Facebook Twitter Pinterest Are Johnson’s spending plans stealing Corbyn’s lunch? John McDonnell expressed doubts the new PM would end austerity entirely. Photograph: Sean Smith/The Guardian

“They’re priorities we’ve been arguing for to a certain extent. We’ll see whether he delivers. But we’ll match him and go well beyond. We’ll meet him with a whole range of radical policies.”

McDonnell suggested that Labour would raise spending with greater responsibility, as the party would increase taxes on high earners and businesses.

One of the changes made by Hammond was to deliver the annual budget statement in the late autumn rather than in the spring and to make it the one big fiscal event of the year. Sources suggested that that might change this year.

According to a weekend report, ministers are preparing for a no-deal emergency budget in the week of 7 October, while Javid has pledged “significant extra funding” for mitigating a disorderly departure. So Javid’s forthcoming announcements, including a budget, might be about softening the impact of the UK leaving the EU without a deal on 31 October. There will also be an expectation that they will address the future of the economy in a post-Brexit Britain.

Javid also has to decide whether to hold a full spending review that will set the budgets for individual Whitehall departments for the next three years, or to roll over the current settlements for a single year. The Treasury prefers three-year deals but civil servants concede that time is short.

Without a full spending review, Johnson skips the usual checks required to ensure cash is spent appropriately, Chadha warned. He added that a no-deal Brexit could divert government spending away from needy areas.

“There is money to be spent. But if it’s spent in the wrong places, the places that do require the money are still in need.”