Downing Street has defended Brexit minister Steve Baker after he told MPs he was aware of an "extraordinary allegation" that Treasury civil servants were trying to influence the Government to back staying in the EU customs union.
Mr Baker said he wanted to proceed with "great caution" on the matter but it would be "quite extraordinary" if the claim was true.
The comments provoked a furious backlash from the union representing senior civil servants, which accused Mr Baker of being irresponsible and "cowardly" for failing to challenge the "conspiracy theory".
And the apparent source of the allegation distanced himself from the claim that the Treasury was attempting to influence policy in favour of staying in the customs union.
Downing Street said a senior Number 10 aide had spoken to Mr Baker about the remarks, and that Prime Minister Theresa May had full confidence in the minister.
A spokesman for the PM told a Westminster briefing: "The minister has set out the events as he recalls them. We have got no reason to question his account.
"This relates to a private conversation which took place some time ago."
The controversy comes hot on the heels of Mr Baker drawing fire earlier in the week for dismissing Whitehall forecasts as "always wrong".
And, in what some at Westminster saw as a pointed intervention, the Cabinet Secretary and head of the UK civil service Sir Jeremy Heywood tweeted: "Proud to address @UKCivilService analysts yesterday. Every day their great work supports the Government in making evidence-based policy & helps deliver better public services across the country."
Mr Baker's Treasury comments came during a Commons exchange with Brexiteer Jacob Rees-Mogg, chairman of the influential European Research Group of Tories.
The North East Somerset MP asked Mr Baker to confirm if he heard from Charles Grant, of the Centre for European Reform think tank, that "officials in the Treasury have deliberately developed a model to show that all options other than staying in the customs union were bad and that officials intended to use this to influence policy".
Mr Baker said the account was "essentially correct", adding: "At the time I considered it implausible because my direct experience is that civil servants are extraordinarily careful to uphold the impartiality of the Civil Service."
Mr Baker was challenged by Opposition MPs as he delivered his answer to Mr Rees-Mogg, prompting him to add: "I didn't say it was correct. I said the account that was put to me is correct.
"It was put to me, I considered it an extraordinary allegation, I still consider it an extraordinary allegation."
Mr Grant said he told Mr Baker during the Conservative Party conference in October that he was aware of research that the Treasury had done which apparently showed the economic benefits of the UK signing free trade deals around the world were less than the costs of leaving the customs union.
But Mr Grant said: "I did not say or imply that the Treasury had deliberately developed a model to show that all non-customs union options were bad, with the intention to influence policy."
Dave Penman, general secretary of the FDA union which represents senior officials, said: "To stand at the despatch box and refuse to challenge a half-baked conspiracy theory about the Civil Service - one that is even now being disowned by its supposed source - is the height of irresponsibility from a serving minister.
"It is not good enough for Mr Baker to simply shrug his shoulders and allow unfounded accusations about officials to go unchallenged.
"Every day civil servants put their personal views aside and work tirelessly to implement the decisions of ministers - and they do so with a professionalism that puts the likes of Mr Baker to shame.
"These cowardly actions are beneath the office he holds, and Mr Baker risks seriously undermining the Government he is a part of."
Labour MP Pat McFadden, a supporter of the Open Britain campaign for close links with the EU, said: "The truth is some Brexiteers don't care what any economic forecast says because they are prepared to have the public pay any economic price in order to fulfil their nationalist dreams of achieving the hardest Brexit possible."