British Minister of Finance Philip Hammond speaks during the Economy Day of the Economic Council of the Christian-Democratic Union (CDU) in Berlin, Germany, 27 June 2017. Around 3,500 representatives from politics, economy and science participate in the event with the motto 'Welt im Wandel : Fuer Freiheit und Sicherheit' (lit. 'Changing World : For Freedom and Security'). Photo: Bernd von Jutrczenka/dpa
UK chancellor Philip Hammond struck a conciliatory note on the EU during his speech at the CDU Economic Council in Berlin

Cabinet tensions over Brexit were laid bare on Tuesday, as chancellor Philip Hammond mocked foreign secretary Boris Johnson over his suggestion that Britain could “have its cake and eat it” after leaving the EU.

Mr Hammond meanwhile was challenged by David Davis, Brexit secretary, over his call for a transition that would extend Britain’s stay in the customs union, even if that meant the UK would not immediately be able to strike its own trade deals.

Mr Davis said Mr Hammond had said “a number of things that are not quite consistent with each other” and insisted that Britain would be able to strike trade deals as soon as it left the EU in March 2019.

Prime Minister Theresa May’s failure to win a Commons majority for her vision of a so-called hard Brexit — and her subsequent loss of authority — has led to cabinet members publicly staking their claims for different versions of how Britain should leave the EU.

Mrs May faces the risk of a cabinet row and divisions in her party at the point at which she decides what route to take.

The political jockeying was played out in Berlin, when Mr Hammond took his soft Brexit message to a conference of German chancellor Angela Merkel’s CDU party. It was a surprise appearance that caught delegates off guard.

Mr Hammond asserted his growing authority in Mrs May’s cabinet by taking a swipe at Mr Johnson, a key figure in the hard Brexit camp, by lampooning the foreign secretary.

Mr Johnson has said that the UK could “have its cake and eat it” when leaving the EU — retaining the advantages of membership without shouldering the costs — a claim that angered Berlin.

Mr Hammond said he was “trying to discourage talk of cake among my colleagues”.

“The question is not whether to have cake, or eat it or even who has the largest slice,” he said.

“The question that matters is whether we can be smart enough to work out how to continue collaborating together [with the EU] to keep the cake expanding for the benefit of all.”

Mr Hammond came close to calling for a customs union during the crucial transition period between the UK leaving the EU and establishing its new relationship with the bloc.

He said that as Britain moved to “a long-term partnership, based on comprehensive free trade in goods and services and a customs agreement that minimises friction at the border, we do so via a transition that protects the free flow of trade across our borders and the integrity of pan-European supply chains”.

In a concession that will go down well in Berlin and other EU capitals, Mr Hammond also said that as Britain moved out of EU legal jurisdiction there would be “genuine and reasonable concerns . . . about things like the oversight and supervision of cross-border financial markets”.

He added: “There are good examples of cross-border collaboration on financial services supervision around the world. We will engage, in a spirit of sincere co-operation, with all genuine concerns expressed by our EU neighbours to agree a co-operative supervisory structure based on international best practice.”

Mr Hammond was speaking to a conference of the economic wing of the CDU, in an effort to capitalise on the mutual centre-right approach of the Conservative party and the CDU. Even though Ms Merkel has made clear that the cohesion of the remaining 27 EU members comes first, she too wants links with the UK to remain close.

Meanwhile Mr Davis, who normally has good working relations with the chancellor, said Mr Hammond’s recent suggestion that a four-year transition period might be desirable was at odds with some of his other statements.

“One of the most important things he’s said is that it’s got to be done before the next election [2022 at the latest],” Mr Davis told the Times CEO summit. “So that’s a maximum of three years.”

Meanwhile Mr Hammond said last week that during a transition period in the customs union, Britain might be able to negotiate but not agree trade deals with third countries.

But Mr Davis backed Liam Fox, trade secretary, in arguing that trade deals could be signed immediately after Brexit in 2019. “We should be at that point for a number of them the day after March 29 2019,” he said.

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