LONDON (Reuters) - Britain would be able to choose to increase public spending and eat into its fiscal “headroom” if the country negotiates a deal to leave the European Union, Chancellor Philip Hammond said on Monday.
“In the event of a successful negotiated exit deal with the European Union I would expect confidence to return to the UK economy very quickly,” he told a committee of lawmakers.
“I would expect us to no longer need to hold the kind of level of headroom against meeting our fiscal rule in 2021 and indeed, it’s not just a single year - we’ve got a profile of headroom against that metric across the whole five year period. We could, if we chose to, allow borrowing to rise a little and eat into that headroom and that would be a choice.”
Hammond also said that faster growth, rather than running a budget surplus, would be an easier way to reduce Britain’s debt burden as a share of economic output.
Reporting by David Milliken, writing by Elizabeth Piper; editing by Alistair Smout