Theresa May has said she will not sack a minister who was forced to apologise after appearing to endorse claims that civil servants had deliberately drawn up negative assessments of the impact of Brexit to try to steer Government policy.
Brexit minister Steve Baker told MPs that the claim had been made by a think tank chief, but had to backtrack when audio recordings showed his recollection was inaccurate.
Questioned on the row during her visit to China, Mrs May insisted that civil servants and ministers were "working together" to deliver the best possible Brexit.
Asked by Channel 5 News whether she would sack Mr Baker, she replied: "No. The ministerial code says that the minister should take the earliest opportunity to amend the record that has given to Parliament and apologise to Parliament. He will do that.
"What I understand the minister did was to reflect what he thought somebody else had said at a meeting. He has now recalled that was not right, he is going to apologise, he is going to ensure that the record in Hansard is correct so that Parliament is not misled when that record is read in the future.
"That's what the ministerial code asks him to do and that is what he will be doing."
Mrs May added: "Civil servants and politicians and ministers are working together to ensure that we do something very simple, which is deliver on what the British people asked us to do, which is leaving the European Union but doing so in a way which enables us not only to take back control of our money and our borders and our laws but also enables us to trade around the world."
The storm erupted after leading Brexiteer Jacob Rees-Mogg asked the minister to confirm if he had 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 Grant strongly denied the claims, and Mr Baker was forced into an apology when an audio recording emerged which contradicted the minister's recollection of the comments.
Downing Street, which had initially said there was no reason to question Mr Baker's version of events, insisted the minister had made a "genuine mistake" after the tape was released by Prospect magazine.
A Government source said that Number 10 now considered the matter closed, saying: "This was a genuine mistake, he has apologised to Charles Grant, and will clarify his remarks in the House.
"We consider the matter closed."
After the audio emerged, Mr Baker tweeted: "This morning in Parliament, I answered a question based on my honest recollection of a conversation.
"As I said, I considered what I had understood to be implausible, because of the impartiality of the civil service.
"The audio of that conversation is now available and I am glad the record stands corrected. In the context of that audio, I accept that I should have corrected the premise of the question.
"I will apologise to Charles Grant, who is an honest and trustworthy man. As I have put on record many times, I have the highest regard for our hard working civil servants. I will clarify my remarks to the House."
Mr Rees-Mogg said of Mr Grant: "If he says he didn't make it, he says he didn't make it, but he made a very similar claim on Twitter."
Asked if civil servants were deliberately skewering evidence, Mr Rees-Mogg delivered a swipe at Chancellor Philip Hammond, telling a Mile End Institute event: "I think the blame should always lie with ministers actually.
"We knew very clearly before the Brexit vote that the Treasury was being guided very strongly by the then-Chancellor of the Exchequer, and it is the Chancellor of the Exchequer who has to take responsibility for his department."
The minister's Commons claims had 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".
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 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.
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."
Meanwhile, the Financial Times reported that Prime Minister Theresa May is considering whether the UK could strike a customs union deal covering trade in goods with the EU.
Such a move would severely limit Britain's ability to make international trade agreements after withdrawal, and anger Brexiteers, the FT said.
However, Downing Street made it clear that it was not looking into a customs union initiative.