Philip Hammond sparked a further rift with Conservative colleagues on Wednesday by telling the Treasury select committee that Britain would meet financial obligations to the European Union even if it failed to secure a free trade deal, forcing a clarification from Number 10.
It came as the chancellor also disclosed that the cabinet had yet to have a full discussion on what should be the government’s preferred “end state position” for the UK after Brexit.
Downing Street said the cabinet would have a specific discussion on the next phase of talks before the end of the year, though there are only two weeks left before the end of the parliamentary term.
The prime minister’s spokesman said the financial settlement was indeed conditional on the final deal. Negotiations over the so-called divorce bill were “in the context of building a future relationship” with the remaining 27 member states, the spokesman said.
“The position we set out is dependent on us forging that deep and special future relationship with the EU that the prime minister has spoken about.”
However, in an earlier committee hearing, Hammond said the UK would still need to meet its legal obligations, regardless of the final outcome. “I find it inconceivable that we as a nation would be walking away from an obligation that we recognised as an obligation,” he said.
“That is not a credible scenario. That is not the kind of country we are. Frankly, it would not make us a credible partner for future international agreements.”
Hardline Conservative Eurosceptics have previously warned Theresa May they could be prepared to vote against a £50bn financial settlement package if they believed any final deal on trade was not satisfactory.
The former Tory leader Iain Duncan-Smith said support from backbenchers was conditional on the final outcome. “If there is no trade deal, then my view – and I would think the whole of the party’s view – would be we don’t owe them any money at all,” he said last week.
Hammond said the figures were not subject to politics. “This is about a careful analysis of obligations and commitments that have been undertaken,” he told the Treasury select committee. “We will fight our corner vigorously where there is any scope for debate. But where it is clear we have an obligation we will meet that obligation.”
Questioned by the committee about preparations for phase two of the negotiations, Hammond said there had been nothing specific agreed, saying discussions were “not at that stage yet” and anything concrete would be premature.
“The cabinet has had general discussions about our Brexit negotiations, but we haven’t had a specific mandating of an end-state position,” he said.
“That is something that will be done first in the sub-committee constituted to deal with this issue, and logically that will happen once we have confirmation that we have reached ‘sufficient progress’ and are going to begin the phase two process with the European Union.”
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