Britain will not pay a £39 billion exit bill to Brussels if it does not secure a trade deal, Brexit Secretary David Davis has said.
The comments appeared to contradict those of Chancellor Philip Hammond who has said it would be “inconceivable” the UK would fail to honour its international obligations.
Pressed on the Chancellor’s remarks regarding the exit payment, Mr Davis told BBC1’s The Andrew Marr Show: “No. It is conditional on an outcome. I am afraid that wasn’t quite right.
“It is conditional. It is conditional on getting an implementation period. Conditional on a trade outcome.
“No deal means that we won’t be paying the money.”
Asked if the Chancellor was wrong, Mr Davis said: “It has been made clear by No 10 already. So that’s not actually new.”
When asked at a Commons Treasury Committee meeting last week whether Britain’s divorce bill was contingent on a trade deal, the Chancellor said: “Nothing is agreed until everything is agreed in this negotiation.
“But I find it inconceivable that we as a nation would be walking away from an obligation that we recognised as an obligation.
“That is not a credible scenario. That is not the kind of country we are. Frankly, it would not make us a credible partner for future international agreements.”
Mr Davis said the chances of Britain leaving the EU without a trade deal have now “dropped dramatically”.
The Cabinet heavyweight insisted that the agreement secured with Brussels to trigger talks on a post-Brexit relationship made the prospect of the UK being forced back into World Trade Organisation (WTO) tariff trading arrangements after withdrawal much less likely.
Mr Davis said: “The odds, as it were, against a WTO, or no deal outcome, have dropped dramatically.”
Mr Davis insisted that agreeing to “full alignment” with the EU in standards and regulations that impacted on Northern Ireland was not the same as “non-divergence” which would have meant “cutting and pasting” rules from Brussels.
The Brexit Secretary said: “We want to protect the peace process and we also want to protect Ireland from the impact of Brexit for them.
“This was a statement of intent more than anything else. Much more a statement of intent than it was a legally enforceable thing.”
The comments came after reports that some hardline Brexiteers had been assured by the Government that the term non-alignment was not binding.
Mr Davis insisted the UK would keep a “frictionless” border with the Irish Republic even if there was no trade deal.
The Brexit Secretary said that a trade deal was “not that complicated”, and suggested a version of the agreement the EU made with Canada, which he dubbed “Canada plus, plus, plus” because it would include areas such as financial services.