Recasts, adds quotes, context
LONDON, April 24 (Reuters) - British finance minister Philip Hammond said Brexit was creating "very significant" uncertainty about the economic outlook, deterring business investment and limiting his ability to make long-term plans on spending and taxes.
Prime Minister Theresa May has been forced to delay Britain's exit from the European Union because lawmakers have refused to back the deal she negotiated with Brussels, fuelling a political crisis in the world's fifth-largest economy.
Hammond said the government was on track to meet its future fiscal targets and there was significant headroom in his budget for flexibility on spending or tax decisions, but Brexit was stalling longer-term planning.
"Given that there is very significant uncertainty about the future trajectory of the economy right now, and will remain so until we have resolved the Brexit issue, I don't think it makes sense to plump for one option or another," he told a parliamentary committee on Wednesday.
Hammond has previously held out the prospect of billions of pounds of extra public spending or tax cuts if parliament approves May's Brexit deal.
Earlier on Wednesday, official data showed Britain's budget deficit fell to its lowest in 17 years as a share of economic output although it came in slightly above an estimate by the government's forecasters.
Hammond is seen by pro-Brexit members of May's Conservative Party as wanting to thwart a more radical split from the bloc.
In his comments to lawmakers on Wednesday, he said Britain would be able to balance its budget by the middle of the 2020s if it wanted to but longer-term fiscal choices would have to wait until the Brexit uncertainty clears.
He cited Brexit as one of the reasons that business investment in Britain was "significantly below" what would normally be expected.
"It's pretty clear to me that the principal reason is uncertainty created by the continuing process of working out how we are going to exit from the European Union," he said.
Hammond also said it was prudent for the government to continue planning for the possibility of a no-deal Brexit.
(Reporting by David Milliken, writing by William James; editing by William Schomberg and Guy Faulconbridge)
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