LONDON (Reuters) - Britain has room to borrow more, according to Gerard Lyons, a former economic adviser to new Prime Minister Boris Johnson who is now tipped as a potential contender to succeed Mark Carney as governor of the Bank of England.
Johnson made tax and spending promises with a cost of tens of billions of pounds while campaigning for the leadership pf the Conservative Party, drawing a parting warning from Theresa May's finance minister, Philip Hammond.
Hammond had held back on increases to public spending over the past year due to uncertainty about whether Britain would face heavy economic costs from a no-deal Brexit - something Johnson says may be needed to ensure Britain leaves on Oct. 31.
Lyons said there was some capacity for borrowing to increase, after years of spending restraint.
"There is scope, in an environment where nominal GDP is rising, real interest rates are low, for the government to actually borrow more in a credible way," Lyons told BBC radio in an interview.
"As we have seen in recent years, the fiscal numbers have improved. And even though in the near term there will be some uncertainty associated with leaving the EU, I think there is more room for maneuver."