Furious Brexiteers have accused Philip Hammond of launching a "dodgy project fear" after the Chancellor warned a no-deal Brexit could cause major economic damage.
Brexit-backing Tories attacked the Chancellor after he pointed to disputed provisional analysis, released earlier this year, which claimed GDP could fall and borrowing could be around £80 billion a year higher by 2033/34 under a scenario in which Britain resorted to World Trade Organisation (WTO) terms due to no agreement with the EU.
Mr Hammond added this initial January analysis was undergoing a "process of refinement" ahead of a parliamentary vote on any deal, noting scenarios which have higher barriers to trade with the EU are expected to have a "more damaging effect" on the economy and public finances.
He also defended the Government's preferred approach, which was outlined in a white paper following a Cabinet summit at Chequers, by saying the economic and fiscal impacts of this would be "substantially better" than no deal.
Eurosceptic Tories have railed against the Government's proposals, which include a "common rulebook" with the EU on goods, amid fears it could restrict the UK's ability to do trade deals.
Mr Hammond's comments in a letter to Conservative MP Nicky Morgan, chairwoman of the Treasury Select Committee, emerged hours after Brexit Secretary Dominic Raab attempted to play down the likelihood of a no-deal Brexit while outlining the impact of such a scenario via a series of technical papers.
Mr Raab also cited the risks as "potential short-term disruption" rather than longer-term, contrary to what Mr Hammond outlined.
Tory MP Marcus Fysh, writing on Twitter, referred to the Treasury's previous "dubious" forecasts before adding that the Chancellor seemed "determined to wheel them out again for yet another instalment of dodgy project fear".
Jacob Rees-Mogg, leader of the pro-Brexit European Research Group of Tory MPs, added on BBC Two's Newsnight: "I think a free trade deal can be achieved, but that leaving on WTO terms is not as absurdly frightening as the Chancellor of the Exchequer thinks it may be."
He also said: "The Treasury's Brexit panic means you can no longer trust the Treasury's forecasts."
Mr Hammond had written: "This January provisional analysis estimated that in a no-deal/WTO scenario, GDP would be 7.7% lower (range 5.0%-10.3%) relative to a status quo baseline. This represents the potential expected static state around 15 years out from the exit point.
"The analysis did not estimate the path the economy and different sectors might take under no deal and the potential for short-term disruption."
Mr Hammond added: "Under a no-deal/WTO scenario, chemicals, food and drink, clothing, manufacturing, cars, and retail were estimated to be the sectors most affected negatively in the long-run, with the largest negative impacts felt in the North East and Northern Ireland.
"GDP impacts of this magnitude, were they to arise, would have large fiscal consequences. The January analysis estimated that borrowing would be around £80 billion a year higher under a no-deal/WTO scenario by 2033-34, in the absence of mitigating adjustments to spending and/or taxation, relative to a status quo baseline.
"This is because any direct financial savings are outweighed by the indirect fiscal consequences of a smaller economy.
"The initial, January cross-Whitehall analysis is now undergoing a process of refinement in the run-up to a parliamentary vote on the deal.
"However, we expect the analysis to show that for scenarios in which we have higher barriers to trade with the EU there will be a more damaging effect on the economy and public finances."
On the Government's preferred approach, Mr Hammond went on: "It is expected that the economic and fiscal impacts of the white paper model will be substantially better than no deal, protecting jobs and livelihoods and supporting both the UK and EU's commitments to no hard border between Northern Ireland and Ireland."
Pro-European Mrs Morgan said of the letter: "The Chancellor has confirmed that the Government forecasts a disastrous hit to our economy and living standards in the event of a 'no-deal' Brexit."
In New York, Foreign Secretary Jeremy Hunt said Britain was "cautiously hopeful" rather than "wildly hopeful" of securing a Brexit deal.