Revealed: Hammond's plan for soft Brexit days before talks open

Philip Hammond is drawing up detailed plans for a softer Brexit that will prioritise “protecting jobs” over Britain’s ability to strike free trade deals after Britain quits the EU.

Senior Whitehall sources have told The Daily Telegraph that Mr Hammond is pushing for a bespoke deal under which Britain would retain associate membership of the EU’s customs union, but retain the freedom to negotiate separate deals on trade services.

As he entered a meeting of EU finance ministers in Luxembourg yesterday, the Chancellor made clear that he was not giving up his battle to resist a hard Brexit. “My clear view, and I believe the view of the majority of people in Britain, is we should prioritise protecting jobs, protecting economic growth and protecting prosperity,” he said, in an apparently open challenge to hardline Brexiteers.

British negotiators believe that the EU might ultimately be prepared to accept such a deal because it would mean Europe’s trade in goods with the UK – where the EU runs a surplus – would not be disrupted by Brexit.

Wolfgang Schäuble, the German finance minister, has not ruled out the UK changing its mind, saying earlier this week it was “up to the British Government to take their own decisions” following a post-election telephone conversation with the Chancellor.

“The UK would negotiation associate membership of the customs union but keep the freedom to negotiate on services – which is the much more important part of the UK economy,” said a source.

However, Alan Winters, the director of the UK Trade Policy Observatory, warned: “It would seem a good halfway house, but it would need a long transitional period because services deals are very complicated to negotiate.”

He added that the UK’s freedom to negotiate deals on services with other non-EU countries is likely to be curtailed, saying: “We would have defined regulatory practices in the EU agreement and in practice we wouldn’t be able to deviate too far from that,” he said.

Mr Hammond will press his case for a softer Brexit with an appearance on the Andrew Marr Show on BBC1 tomorrow morning, and then his delayed Mansion House speech on Monday.

Cabinet ministers pushing for a soft Brexit have strengthened their hand on the senior Whitehall committee. chaired by Mrs May, that will oversee the talks. Damian Green, the First Secretary and a passionate Remain campaigner, has taken a place on the committee, alongside Mr Hammond. Boris Johnson and David Davis, both Brexiteers, also sit on the committee.