Downing Street rebuked Hammond after suggesting UK would pay an EU divorce fee without a trade deal
In an outburst that threatened to reopen the bitter Cabinet rift over Brexit, the Chancellor claimed walking away from “obligations we have entered into” would be “inconceivable” whatever the outcome of the talks about the future relationship between the UK and Brussels.
His outburst irritated Euro-sceptic Tories, who say British taxpayers should not pay anything unless EU chiefs are willing to agree a trade deal, and triggered alarm among Theresa May’s officials.
Philip Hammond spoke out at a hearing of the Commons Treasury Committee.
Asked by an MP if paying the exit fee was “contingent” up a future trade relationship, the Chancellor said: “I would find it inconceivable that we as a nation would be walking away from an obligation that we recognised as an obligation; that’s just not a credible scenario, that’s not the kind of country we are and, frankly, it would not make us a credible partner for future international agreements.”
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The position of the Government is that nothing is agreed until everything is agreed and that applies to any financial settlement
He added: “This is not about agreeing a sum that somebody plucked out of thin air; this is about a carefully analysis of obligations and commitments that have been undertaken.
“We would defend our corner vigorously where there was any scope for debate, but where it is clear we have entered into an obligation we will meet that obligation.”
After the hearing, Brexit-backing Tory MP Jacob Rees-Mogg described the remarks as “unacceptable”.
He added: “Money is our leverage for a deal.”
Philip Hammond speaking to the Commons Treasury Committee
Later, the Prime Minister’s spokesman said: “The position of the Government is that nothing is agreed until everything is agreed and that applies to any financial settlement.”
Asked if the country had a “moral obligation” to pay whatever the outcome of the Brexit talks, the spokesman added: “The Prime Minister has been clear that nothing is agreed until everything is agreed and that includes the financial settlement.”
The rebuke followed a series of clashes between 10 Downing Street and the Treasury over the details of the Government’s Brexit plan.
It came as Mrs May stepped up her diplomatic push to restart stalled talks with European President Jean-Claude Juncker that had attempted to conclude the initial negotiations before moving on to the crucial second round, focused on trade.
The Prime Minister spoke by telephone to Democratic Unionist Party leader Arlene Foster and Irish premier Leo Varadkar yesterday in an attempt to overcome the obstacle caused by a rift over the future of the border between Northern Ireland and the Irish Republic.
In the Commons yesterday, Mrs May insisted any deal with Brussels will keep the UK together and not allow a new customs border in the Irish Sea.
“We will ensure that there is no hard border between Northern Ireland and the Republic of Ireland.
Brexit-backing Tory MP Jacob Rees-Mogg described Hammond’s remarks as ‘unacceptable’
“We will do that while we respect the constitutional integrity of the United Kingdom, and while we respect and protect the internal market of the United Kingdom,” the Prime Minister told MPs.
Mrs May said “very good progress” had been in the negotiations and Mr Juncker had indicated that “he is confident that we will be able to achieve sufficient progress” to allow the beginning of the second round.
But the Prime Minister faced a string of warnings from Tory backbenchers about her concession to Brussels in the negotiations.
Mr Rees-Mogg asked her: “Will she apply a new coat of paint to her red lines, because I fear that on Monday they were beginning to look a little bit pink?”
Senior Tory MP Bernard Jenkin feared proposals for keeping many UK business regulations in line with those in Brussels could leave the country “shackled” to the EU and jeopardise trade deals with other parts of the world.
He said there was “very strong enthusiasm for free trade deals with the UK from countries like Canada, Japan, the United States and Australia.
He added: “None of these opportunities will come our way if we remain shackled to EU regulation after we have left the EU?”
And Peter Bone, another Euro-sceptic Tory MP, said: “When the British people voted to leave the European super-state, they voted to end the free movement of people, to stop sending billions and billions of pounds to the EU each and every year, and to make our laws in our own country, judged by our own judges.
“Are we still on course to deliver that? If we have a problem, would it help if I came over to Brussels with the Prime Minister to sort it out?”