Theresa May’s chancellor has broken ranks to suggest she should back a softer Brexit which can win Labour backing after her deal suffered a second crushing defeat in the Commons.
Philip Hammond appeared to break with the government’s position as he said the prime minister should now try and “build consensus” across the Commons “for a deal we can collectively support”.
In an impromptu briefing, Downing Street later insisted Hammond’s comments were “consistent” with May’s remarks after her deal was rejected on Tuesday night – that MPs now face “bleak” choices about Brexit “in the coming days”.
But the chancellor’s words were interpreted as a demand for May to now pivot towards backing a customs union with the EU, the only position Labour will support, but one which will enrage her own Brexiteers.
Using the high-profile Spring Statement on the economy to set out his case, Hammond said: “To be frank, last night’s events mean we are not where I hoped we would be today.
“Our economy is fundamentally robust but the uncertainty I hoped we would lift last night still hangs over it.
“We cannot allow that to continue, it is damaging our economy and it is damaging our standing and reputation in the world.
“Tonight we have a choice - we can remove the threat of an imminent no-deal exit hanging over our economy.
“Tomorrow we will have an opportunity to start to map out a way forward towards building a consensus across this House for a deal we can collectively support to exit the EU in an orderly way, to a future relationship that will allow Britain to flourish, protecting jobs and businesses.”
“He is calling for compromise”
- Treasury source
A Treasury spokesperson insisted Hammond supports May’s deal, saying: “He has been very clear that he supports the PM’s deal but he has also been saying for months that compromise is how we get through this and he is calling for compromise.”
One government source said that Hammond made a similar point during the cabinet meeting earlier and May had made clear her irritation.
The chancellor warned that economic progress will be “at risk” if a smooth and orderly exit from the EU cannot be agreed.
“I hoped we would do that last night but I am confident that we, as a House, will do it over the coming weeks,” he told the Commons.
“Leaving with a no-deal would mean significant disruption in the short and medium-term and a smaller, less prosperous economy in the long term than if we leave with a deal.
“Higher unemployment, lower wages, higher prices in the shops - that is not what the British people voted for in June 2016.”
It came as MPs prepare to vote tonight on whether to block a no-deal Brexit on March 29, in which May is offering Tories a free vote.
MPs are expected to rule out no deal on March 29, which will pave the way for a further vote tomorrow on whether to ask the EU for an extension of Article 50 to delay Brexit.
May’s official spokesman said the Article 50 motion was likely to be “heavily amended” with MPs’ proposals for different options.
Hammond is thought to back so-called indicative votes in which MPs were free to vote for whichever proposal they see fit in an attempt to find out what kind of Brexit deal can win a majority.
The spokesman said there are “no plans” to do so but would not say whether May would again offer free votes on Thursday.
Shadow Chancellor John McDonnell urged the government to back Labour’s proposed deal.
“Of course Brexit looms large over everything we discuss.
“Even today, the chancellor has tried to use the bribe of a deal double dividend or threat of postponing the spending review to cajole MPs into voting for the government’s deal.
“Publication of the tariffs this morning is clearly part of this strategy.
“This is a calamitous strategy. It is forcing people into intransigent corners.
“What we need now is the chancellor today to commit to vote to take no deal off the table.
Then to join me in discussing the options available, including Labour’s deal proposal and yes, if it requires it, taking any deal back to the public.”