Chancellor Philip Hammond backs UK leaving EU Customs Union

The Chancellor tried to explain breaking the Tory manifesto pledge

Philip Hammond's first Budget has caused a storm of controversy (EPA)

The Chancellor has said Britain will not stay within the EU’s customs union after Brexit – despite a Conservative manifesto pledge to remain in the single market.

Philip Hammond said that it was “clear” the UK would leave the trading area, which has a common external tariff and no customs duties between member states.

Mr Hammond said that the EU referendum result changed the nature of the pledge. Asked about breaking the manifesto commitment, he said the Government had responded to changes in the “real world”.

“The decision to leave the European Union has changed the game,” he said.

He added: “It's clear that we can't stay in the customs union and wasting a lot of political capital arguing about that will not be fruitful.”

It would be possible for Britain to leave the European Union and remain in the customs union. A number of countries, the biggest of which is Turkey, are in the union without being members of the EU.

There had been speculation that the Chancellor, who supported Remain, might try to block exit from the single market.

The Government’s Brexit white paper says that the UK “will not be bound by the EU’s Common External Tariff or participate in the Common Commercial Policy” in order to “ensure that we can take advantage of the opportunity to negotiate our own preferential trade agreements around the world”.

Brexit Secretary David Davis has previously said that such a policy “amounts to exactly” leaving the customs union.

Theresa May has said she will trigger Article 50 by the end of this month, starting the formal process of negotiating to leave the European Union.