UK would need all its fiscal headroom, and more, for a no-deal Brexit - Hammond

LONDON (Reuters) - Britain would need to spend all its existing, 27 billion-pound "fiscal headroom" and more to offset the impact on the economy of a no-deal Brexit, finance minister Philip Hammond said on Tuesday.

The comments represented Hammond's latest warning to Boris Johnson and Jeremy Hunt, the rivals to become Britain's next prime minister, who have promised higher spending and tax cuts while also saying they are prepared to take Britain out of the European Union without a transition deal.

"I have no doubt whatsoever that in a no-deal Brexit we will need all of that money and more to respond to the immediate impacts of the disruption a no-deal exit," Hammond said, referring to the gap between the government's projected budget deficit and his own, bigger target for the shortfall.

"And that will mean that there is no money available for longer-term either tax cuts or spending increases."

Hammond said government research estimated that a disruptive no-deal Brexit would lead to 90 billion-pound hit to the public finances which would also need to be factored in to any emergency budget decisions.

Hammond, who is likely to be replaced as finance minister soon, said Britain's next prime minister will have to decide whether to stick to a plan for a review of public spending needs for the next three years or do a shorter, one-year review to respond to the uncertainty about Brexit.

(Writing by William Schomberg; editing by Stephen Addison)