Philip Hammond has been criticised by Brexiteers for launching a project fear by reiterating that a no-deal Brexit could damage the economy.
The chancellors warning was published in a letter just hours after the government laid out plans for a no-deal Brexit.
He highlighted 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 if Britain resorted to World Trade Organisation (WTO) terms due to a no deal with Europe.
Mr Hammond also added that this analysis was undergoing a process of refinement ahead of a parliamentary vote on any deal, noting that some scenarios are expected to have a more damaging effect on the economy and public finances.
Tory MP Marcus Fysh responded to the chancellors claims on Twitter by referring to the Treasurys previous dubious forecasts and saying that he seemed determined to wheel them out again for yet another installment of dodgy project fear.
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Other Eurosceptic Tories have railed against the Governments proposals, which include a common rulebook with the EU on goods, amid fears it could restrict the UKs ability to do trade deals.
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Mr Hammonds 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.
Jacob Rees-Mogg, leader of the pro-Brexit European Research Group of Tory MPs, added on BBC Twos 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 Treasurys Brexit panic means you can no longer trust the Treasurys 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.
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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.
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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 Governments 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 EUs 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.
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In New York, Foreign Secretary Jeremy Hunt said Britain was cautiously hopeful rather than wildly hopeful of securing a Brexit deal.
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