Chancellor Philip Hammond will make an explosive intervention in the looming Tory leadership race with a fierce attack on advocates of a no-deal Brexit who he will say are trying to "hijack" the result of the referendum.
In remarks set to raise Tory tensions on EU withdrawal, Mr Hammond will use a speech to the CBI’s annual dinner in London on Tuesday to warn against “right-wing populism”.
He will say that if the Brexit issue is not resolved in the next few weeks there is a “real risk” of a new prime minister moving towards a “damaging” no-deal exit policy for “ideological” reasons.
In comments that are likely to be seen as a swipe at some leading Tories as well as Brexit Party leader Nigel Farage, the Chancellor will say: “On the populist right, there are those who now claim that the only outcome that counts as a truly legitimate Brexit is to leave with no deal.
“Let me remind them: the 2016 Leave campaign was clear that we would leave with a deal.
“So to advocate for no deal is to hijack the result of the referendum, and in doing so, knowingly to inflict damage on our economy and our living standards.
“Because all the preparation in the world will not avoid the consequences of no deal.
“So I will continue to fight, in the face of this polarisation, for a negotiated Brexit – an outcome that respects the British people’s decision to leave, while recognising that there is no mandate for a no-deal exit, and that we have an absolute obligation to protect Britain’s jobs, businesses and future prosperity.
“But we need to be clear that if we do not resolve this issue in the next few weeks, there is a real risk of a new prime minister abandoning the search for a deal, and shifting towards seeking a damaging no-deal exit as a matter of policy… to protect an ideological position which ignores the reality of Britain’s economic interests and the value of our union.”
Mr Hammond’s comments come after Mr Johnson and former Brexit secretary Dominic Raab said they wanted to renegotiate Mrs May’s withdrawal deal with the EU, but not rule out a no-deal exit.
With Mrs May expected to announce a firm resignation date within weeks, Mr Raab called for a 5p cut in the basic rate of income tax.
After launching a new group of self-styled centre-right Tories called One Nation, Work and Pensions Secretary Amber Rudd indicated the bloc could support a leadership candidate who did not rule out no-deal.
Ms Rudd told BBC2’s Newsnight: “The no-deal option is really a contingency plan.
“I described it as wearing a seatbelt when you are driving a car.
"Just because you have got a seatbelt on doesn’t mean you want to have a crash
“That’s how I view deal no-deal Brexit.
"It’s like it’s there in case it happens.
"But very much at the centre of Government policy is getting a deal.”
Around 25 Tory MPs attended a meeting in Westminster which outlined the One Nation group’s ideas, including rejecting “narrow nationalism”, supporting a “strong society” and backing public services.
However, Ms Rudd’s comments on a no-deal candidate appeared at odds with fellow leading One Nation group member, digital minister Margot James.
Asked if One Nation could back a Tory leadership contender who advocated a no-deal Brexit, Ms James said: “I think it would be difficult for a candidate who would let the country leave without a deal to subscribe to quite a lot of those values and the policies that flow from them.
“I don’t think many candidates are going to stand up and say, ‘I think the country should leave without a deal’. No.
“But there are candidates who will go out of their way to make sure the country doesn’t leave without a deal and that is what we need to ensure we get out of this leadership contest.”
Tory grandee Sir Nicholas Soames condemned the move against Lord Heseltine, telling Channel 4 News: “I think that’s a really stupid, bovine thing to do.”