The UK faces a potentially lengthy delay to Brexit, Philip Hammond said as he indicated the Tories could be prepared to compromise on a customs union.
The Chancellor, who also said a referendum on any Brexit deal was a “perfectly credible” proposal, said fulfilling the promise of leaving the European Union was the Government’s central commitment and other pledges made were “somewhat secondary” to that.
Meanwhile, backbench legislation forcing Theresa May to delay Brexit rather than risk a no-deal break from Brussels cleared the Commons by a majority of just one in a knife-edge Commons vote.
Health Secretary Matt Hancock said the Bill made the chances of the UK crashing out “very unlikely”, as he suggested he could accept a customs union compromise.
“I would much prefer the Prime Minister’s deal to a customs union, to be frank,” Mr Hancock told BBC Radio 4’s Today programme.
“I want to deliver Brexit. I have spoken about the problems of a customs union and I don’t think it’s as good for the country. But I also want to deliver Brexit.”
His comments followed the opening round of talks between Theresa May and Jeremy Corbyn aimed at finding a possible Brexit compromise which the Labour leader described as “useful but inconclusive”.
The meeting sparked fury among some Conservatives, with two ministers quitting Mrs May’s Government and a string of backbenchers directly challenging Mrs May during Prime Minister’s Questions in the House of Commons.
Mr Hammond’s comments are likely to further enrage Brexiteers on the Tory benches.
In an interview with ITV’s Peston, he said he was expecting Brussels to insist on a lengthy delay to Brexit but stressed that the Government wanted to ensure that any extension to the Article 50 process could be cut short if a deal was agreed by MPs.
He said the Government wanted “absolute clarity that as soon as we have done the deal we are able to bring that extension to an end”.
Signalling that compromise would be required from both sides in the talks with Labour, Mr Hammond was asked whether a customs union was a price worth paying for a deal.
“If that’s what we have to do then let’s look at that,” he said.
Mr Hammond said that “some kind of customs arrangement is clearly going to be part of the future structure”.
“When you enter into a negotiation like this to find a compromise way forward, both parties have to give something up.
“There is going to be pain on both sides.”
On the prospect of another referendum, Mr Hammond said a “confirmatory” vote on any Brexit deal was a “perfectly credible proposition”, unlike some of the other ideas circulating at Westminster which were “not deliverable”.
However Mr Hancock said he was “very, very strongly against” a second referendum.
Anger among Tory Brexiteers was increasing, with European Research Group deputy chairman Steve Baker telling Peston the leadership of the Conservative Party was “out of step with members and, I think, the country”.
He said a majority of Tory MPs would not accept a customs union and Mrs May would effectively be making Mr Corbyn deputy prime minister.
“If we find a majority of Conservative MPs voting against the policy, it’s not us who will be moving on,” he warned.
Former whip Michael Fabricant questioned whether the Chancellor had “gone rogue”.
Andrea Jenkyns told BBC’s Newsnight the Prime Minister should resign for a “fresh approach” to Brexit.
In the Commons, legislation spearheaded by Labour’s Yvette Cooper requiring Mrs May to seek a delay to Brexit rather than risk the UK crashing out on April 12 was passed by 313 votes to 312.
As the Bill to seize control of the Brexit process went through the Commons, Mrs May suffered yet another humiliating defeat as the Government’s attempt to prevent the legislation from limiting the powers of a minister resulted in a 180-vote defeat, with 91 Tory rebels.
The legislation will now be fast-tracked through the House of Lords.
Further discussions will take place on Thursday between members of Mrs May’s and Mr Corbyn’s teams.
Labour’s hierarchy has its own divisions over the prospect of a referendum.
Mr Corbyn said he raised the issue of a public vote with Mrs May, but only outlining Labour’s policy, rather than setting any red lines on a potential deal.
“I said this is the policy of our party, that we would want to pursue the option of a public vote to prevent crashing out or to prevent leaving with a bad deal,” he said.
Deputy Labour leader Tom Watson, a leading advocate for a referendum, told Peston: “I don’t think our party would forgive us if we were to sign off on a Tory Brexit without that kind of concession.”
Labour chairman Ian Lavery reportedly warned shadow cabinet colleagues on Wednesday that backing a referendum could split the party, but Mr Watson said, “it’s a very tricky road ahead for us if we were to take away that conference decision from our members”.
European leaders will continue deciding how to respond to the political chaos at Westminster, with Ireland’s Leo Varadkar hosting German Chancellor Angela Merkel in Dublin.