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After a summer of ministerial feuding, Mr Hammond, who favours a “softer” pro-business Brexit, came together with International Trade Secretary Liam Fox, from the Brexiteer wing of the party, to declare there could be no “back door” attempt to keep Britain in the EU.
In a joint article for the Sunday Telegraph, they agreed that while a period of transition would be needed after 2019 to prevent a damaging “cliff-edge” break with the EU, it would be “time limited” and would mean pulling out of both the single market and the customs union.
Prime Minister Theresa May will hope the intervention of the two ministers will cool temperatures in the Tory ranks amid divisions over Brexit and speculation of a possible leadership challenge when MPs return to Westminster in September.
However, Liberal Democrat leader Sir Vince Cable said it was clear that Mr Hammond had lost his power struggle with the Brexiteers.
“Over the summer, we heard that Philip Hammond was courageously fighting off the more extreme Brexiteers. Supposedly he was looking for a compromise to keep Britain within the customs union and single market as long as possible,” he said.
“The rebellion didn’t last very long. He has now teamed up with one of the more extreme and ideological supporters of a ‘hard Brexit’. It is now painfully clear who calls the shots in the Cabinet; it isn’t the Chancellor.”
In contrast, the joint move was welcomed by the pro-Brexit Foreign Secretary Boris Johnson who said it was the “right way forward”.
“Create certainty and great new European relationship. Get job done + on with Global Britain,” he wrote on Twitter.
In their article, Mr Hammond and Dr Fox said a transition period was needed to give businesses confidence they would be able to carry on trading normally.
“That is why we believe a time-limited interim period will be important to further our national interest and give business greater certainty - but it cannot be indefinite; it cannot be a back door to staying in the EU,” they wrote.
“We are both clear that during this period the UK will be outside the customs union and will be a ‘third country’, not a party to EU treaties.”
Meanwhile, the leading Conservative Remainer Anna Soubry indicated she could be prepared to join with politicians from other parties to stop the country “staggering recklessly” towards a hard break with Brussels.
“Could I ever see myself joining with like-minded people who want to save our country from such an appalling fate? And has that moment arrived yet?” she wrote in an article for The Mail on Sunday.
“The answer to the first question is ‘it is not impossible’; the answer to the second is ‘no’. But I would be betraying my principles if I did not make it clear that country must always come before party.”
Brexit Secretary David Davis said exactly how the transitional arrangements would work had still to be determined.
“By triggering Article 50 in March of this year we leave in March 2019, what the transition period will look like is down to the negotiations,” he said during a surprise appearance at Alex Salmond’s show at the Edinburgh Festival Fringe.
However Labour MP Ben Bradshaw, a supporter of the Open Britain campaign, said that without membership of the single market and the customs union, the country would be worse off.
“Pulling Britain out of the single market and the customs union in 2019 will drive our economy over a cliff edge, putting jobs and family finances at risk,” he said.
“Nobody voted to be poorer last year but that is exactly what will happen if the Government continues to put Eurosceptic dogma ahead of the national interest.”