A spokesman for the prime minister insisted that she had full confidence in her chancellor, despite distancing herself from remarks he made in Davos on Thursday, where he said the UK should seek to diverge only “very modestly” from the EU after Brexit.
The chancellor, along with the Brexit secretary, David Davis, and business secretary, Greg Clark, presented a united front on Friday by signing a joint letter to business leaders, seeking to reassure them that rules and regulations will remain the same during the post-Brexit transition period.
Hammond told Sky News: “There are people that wanted to stay in the EU customs union – we reject that argument. There are people that want us to sever our trade links with Europe and give up this market – we reject their arguments too.
“We have got to stick to the middle way, which is negotiating the maximum access we can get to European markets compatible with the red lines we have already set out about repatriating control over our laws, our borders and our money.”
But privately, senior government figures remained at loggerheads, with Brexiters claiming the Treasury is plotting to extend the transition to three years and beyond, in the hope of leaving Britain indefinitely in a “Hotel California” status, in which “you check out, but you never leave”.
Another said: “There are different views, and some of those views are going to have to crystallise over the coming months.”
After Boris Johnson was given a dressing-down over well-briefed calls for more cash for the NHS on Monday, the spat with Hammond underlined the continued divisions in May’s freshly reshuffled cabinet.
In Brussels, meanwhile, European officials increasingly fear that May is drifting on Brexit, amid growing concern that she is unable to make hard political choices.
“There is a growing view that for domestic reasons [the British] want to play everything long and avoid making difficult choices that will antagonise the Eurosceptics or give Jeremy Corbyn an advantage,” one senior European diplomat told the Guardian. The British were waiting “for the for the EU to fill in the dots … and that is a high-risk strategy”.
Asked if that increased the risks of no-deal Brexit, the diplomat said yes, “in particular given the ticking clock”.
Davis stressed government unity on Friday, saying that while there would be “arguments about the tactics”, Hammond and the prime minister fundamentally agreed on the way forward.
Answering questions after a speech on Brexit in Middlesbrough, Davis said Hammond had been correct in his assessment, but had been talking about what would happen during a transition period.
“At the beginning, when we’re out, there will be very, very little initial difference between the standards and regulations that apply in our country and on the continent of Europe. And therefore access to the markets will continue with very, very little disruption. That was the point he was driving at.”
Describing the transition period as “a bridge to the future partnership,” Davis said the UK will begin to negotiate trade agreements with the rest of the world as soon as the transition period begins.
In Davos on Friday, Hammond said he had not spoken to May since his speech, but said Downing Street had “quite rightly” argued that leaving the EU, as well as the customs union and single market, were significant changes. The government nonetheless faced continued unrest from among some Conservative MPs over the apparent divisions.
The Eurosceptic backbencher Bernard Jenkin told BBC2’s Daily Politics: “I think that if there are really big ideological divisions between the chancellor and the prime minister, that is usually not very good news for the stability of a government, and the PM will have to address that one way or the other – and I will leave that thought there with you.”
Jenkin said the government’s Brexit policy was clear, adding: “[Hammond] should not try to play blow football with the policy and to try to make it into something that it isn’t.”
Mark Pritchard, a formerly pro-remain Conservative MP, tweeted that there was “no major revolt on the Tory backbenches”.
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