Brexiteers have attacked Philip Hammond for reiterating a warning that a no-deal Brexit could damage the economy.
Conservative MP Marcus Fysh accused Mr Hammond of embarking on “another instalment of dodgy project fear”.
Meanwhile, the World Trade Organization head has told the BBC a no-deal “would not be the end of the world…but it’s not going to be a walk in the park”.
In a letter published on the Treasury website, Mr Hammond repeated the findings of the Treasury’s provisional Brexit analysis released earlier this year.
That analysis includes a warning that a no-deal Brexit could mean a 7.7% hit to GDP over the next 15 years, compared to the “status quo baseline”.
Writing to Nicky Morgan, chair of the treasury committee, he said that under a no-deal scenario chemicals, food and drink, clothing, manufacturing, cars and retail would be the sectors “most affected negatively in the long run”.
He added that the largest negative impacts would be felt “in the north-east [of England] and Northern Ireland”.
The letter also said Treasury analysis estimated borrowing would be around £80bn a year higher under a no-deal scenario by 2033.
Mr Hammond added that this analysis was now “undergoing a process of refinement” and emphasised that a no-deal Brexit was not the government’s preferred option and that it was “confident of a agreeing a good deal”.
The timing of the letter was criticised, coming so soon after Brexit Secretary Dominic Raab sought to play down the risk of a no-deal – describing the impact as a “potential short-term disruption”.
Prominent Brexiteer Jacob Rees Mogg said leaving on WTO terms was not “as absurdly frightening as the chancellor of the exchequer thinks it may be”.
“As a dog returneth to his vomit, so a fool returneth to his folly,” he said.
“The naysayers in the Treasury have consistently wanted to paint a bleak picture because they are frightened of taking responsibility for managing the economy without the crutch of the EU. It is a sign of their weakness.
“What Mr Hammond is doing is a reminder of why no one believes the politicised forecasts of the Treasury.
“The Treasury is desperate to stop Brexit. Everything the Treasury does has to be read in this light.”
However, Mrs Morgan – a Remain campaigner – said the chancellor’s letter confirmed that a no-deal Brexit would be a “disastrous hit” to the economy and living standards.
Shadow Brexit secretary Keir Starmer said: “A no-deal Brexit has never been viable and would represent a complete failure of the government’s negotiating strategy.”
The director-general of the World Trade Organization, Roberto Azevedo, told Radio 4’s Today programme that a no-deal Brexit was neither going to be “the end of the world” nor “a walk in the park”.
He said there would be an impact, with the possibility of trade “barriers” at the borders and tariffs between the UK and the EU almost certain.
“The EU cannot discriminate amongst the WTO members, so the UK will have to be treated as all the other members, and the other members pay tariffs so the UK will have to pay tariffs as well,” he said.
He was also asked whether the UK could unilaterally remove its trade tariffs.
“Technically, yes,” he replied. “But not only to the EU, to everybody, so you cannot pick and choose to whom you lower your tariffs.
“If you decide that a particular product, let’s say glasses, that they go down to zero, that’s perfectly right, any member of the WTO can do that. But that zero applies to everyone else.”
Conservative anger at Philip Hammond’s ‘dodgy project fear’}
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