Philip Hammond will publish a breakdown of spending on Brexit preparations before next month’s budget, amid growing pressure from pro-leave backbench MPs to show the government is serious about preparing for “no deal”.
In response to a question from former Conservative leader Iain Duncan Smith, Theresa May said in the House of Commons on Wednesday that £250m would be made available in the current financial year.
“Where the money needs to be spent, it will be spent,” she said.
But Labour’s Heidi Alexander accused the prime minister of “ramping up the no-deal rhetoric on Brexit and backtracking on her commitment to stay in the single market and customs union for transition, all because she is afraid of the most rightwing, rabid elements in her own party”.
Earlier, during a lengthy grilling by the treasury select committee, the chancellor – who is regarded by leavers as too pessimistic about Brexit – said money might need to be spent in the new year but it was too soon to start assuming no deal was likely.
“What I am not proposing to do is allocate funds to departments in advance of the need to spend. Every pound we spend on contingent preparations for a hard customs border is a pound we can’t spend on the NHS, social care, education or deficit reduction,” he said, warning that spending on new infrastructure could prove “nugatory” if a deal emerges.
Separately, Labour said it would reject a no-deal scenario, and try to pressure the government to return to Brussels and keep talking.
“We would oppose that,” Jeremy Corbyn’s spokesman said. “If the government comes back with that outcome, we will seek to push for continued negotiations to get the kind of deal that’s in the interests of the country.”
It is unclear whether the government would be forced to offer MPs a vote before plunging out of the EU without an agreement in place; but if they did so, pro-EU Conservative MPs would be likely to join with Labour.
Labour believes some Conservative rightwingers are actively seeking a no deal, because they hope it would unlock a low-tax, low-regulation economic model.
Former Tory chancellor Ken Clarke and Labour’s Chris Leslie have tabled an amendment to the EU (withdrawal) bill, which would prevent ministers from going ahead with Brexit unless a transition deal – along the lines of the one set out in the prime minister’s Florence speech – is agreed.
Cabinet ministers have been under pressure from a vocal group of hard Brexit MPs to talk up the prospect that the government could walk away from talks in Brussels without an agreement.
Bernard Jenkin, a Brexit campaigner, told the BBC’s Daily Politics that the prime minister had “cleared up some of the ambiguity that the chancellor left,” adding: “How can I put it more diplomatically than that?”
Brexiters, including backers of the foreign secretary Boris Johnson, accuse Hammond and the Treasury of having an unnecessarily pessimistic view about the prospects for Brexit.
Under questioning by MPs at the select committee, Hammond confirmed some of the risks of no deal, including the fact that flights to Europe might theoretically be unable to take off. But he also argued that “no deal” was not the worst scenario that could emerge.
“We also have to consider the possibility of a bad-tempered breakdown of the talks where we have non-cooperation,” he warned, adding that in those circumstances, governments might even act against their own economic self-interest.
The chancellor also urged the EU27 to press ahead with agreeing a transitional deal, saying a “cloud of uncertainty” was already dampening business investment.
“The very strong message I get is that certainty itself is of enormous value, and probably more important than getting the perfect outcome,” he said.
Hammond underlined the “need for speed” in agreeing the outlines of the transition, expected to cover about two years, which is aimed at giving businesses and the government time to adjust to the post-Brexit world.
Senior government figures deny they are deliberately stressing the need to be ready for Britain to leave on World Trade Organisation terms if necessary. One cabinet minister said the sudden salience of the issue was because, “one or two have been obsessed by it for some time and think now is the moment to press their case”.
Backbench Conservatives were addressed by the environment secretary Michael Gove on Wednesday evening as what one described as a “very good” meeting of the 1922 committee. Another said Gove had reassured his colleagues that he had no intention of ever standing again for his party’s leadership.
He has presented a united front with fellow Vote Leave frontman Johnson since knocking him out of last year’s bitter Tory leadership contest. The pair used strikingly similar language on Tuesday to welcome May’s statement to MPs setting out her plans for a transition deal.
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