Chancellor slapped down for saying Brexit trade changes could be 'very modest'
Chancellor Philip Hammond has been rebuked after stoking up a row with Eurosceptic Conservatives by suggesting any change to Britain's trade relations with the EU after Brexit could be "very modest".
In a sign of Tory sensitivity on the issue, a Downing Street source said the plans to leave the customs union and single market "could not be described as very modest changes".
Mr Hammond's comment came as leading Tory Brexiteer Jacob Rees-Mogg urged ministers not to be "timid and cowering" in their approach to EU withdrawal.
Mr Rees-Mogg, chairman of the influential European Research Group, was warning that close alignment with the EU after Brexit would prevent "meaningful" trade deals with other countries, leaving Britain a "vassal" of the remaining 27-nation bloc.
In a speech to UK businesses at the World Economic Forum in Davos, Mr Hammond warned that European economies were not currently strong enough to be exposed to "any unnecessary economic, fiscal or financial stability risks".
He said: "It is right to recognise that the process of the UK moving from membership of the EU to a future and different relationship with the EU has the potential to present such risks."
Mr Hammond was speaking to a lunch hosted in the Swiss ski resort by the CBI, whose director general Carolyn Fairbairn earlier this week called for the UK to remain in a customs union with the EU.
The Chancellor - who is regarded by many Eurosceptics as a Cabinet obstacle to a "clean break" from Brussels - said he welcomed Ms Fairbairn's speech for its focus on securing "the closest possible future relationship between the EU and the UK, post-Brexit".
He said he was hopeful of achieving a good deal on future trade with the EU because "we are taking two completely interconnected and aligned economies with high levels of trade between them and selectively moving them - hopefully very modestly - apart."
A Downing Street source said: "The Government's policy is that we are leaving the single market and the customs union.
"Whilst we want a deep and special economic partnership with the EU after we leave, these could not be described as very modest changes."
Mr Hammond sought to clarify his remarks by saying "for anyone concerned" that he stressed that the UK will be outside the customs union and single market "which clearly represents change".
Mr Hammond also surprised some observers by suggesting that Britain and the EU will not finalise proposals for a trade deal before MPs vote on the Brexit withdrawal agreement.
His comments appear to put him at odds with Theresa May, who has said the UK can complete a free trade deal before Brexit day on March 29 2019, at which time a separate withdrawal and transition agreement is expected to be in place.
MPs won the right to have a "meaningful" vote on the withdrawal agreement after Tory Brexit rebels inflicted a defeat on the Government last month.
Mr Hammond's admission that MPs are unlikely to know the proposed details of the future UK-EU relationship has led to accusations they will be voting "with their eyes closed".
Asked if he expected the details of the future relationship to be laid out in full by the time Parliament votes on the withdrawal deal, the Chancellor told Bloomberg TV: "Probably not the full details, but we would expect the high level shape of the future relationship to be emerging by that time."
Mr Hammond also stressed Britain would reject any trade deal which did not include financial services, although he revealed the Government was no longer seeking to maintain "passporting" rights for City firms.
"The only deal that can ever get done is one which is fair to both parties, and a deal which included goods but didn't include services could never be fair, could never be attractive to the UK," the Chancellor told a panel discussion in Davos.
Speaking at Churcher's College in Petersfield, Hampshire, Mr Rees-Mogg will say Britain will be unable to make the most of the opportunities of Brexit if it remains in "close alignment" with the bloc.
"If we are timid and cowering and terrified of the future, then our children and theirs will judge us in the balance and find us wanting," he will say.
"Close alignment means de facto the single market, it would make the UK a rule-taker like Norway, divested of even the limited influence we currently have.
"Conformity with EU rules will also prevent us from making meaningful trade deals with other nations. No sensible nation would negotiate with the UK for a marginal gain when we would merely be a vassal of the EU."