Philip Hammond has admitted there have been no specific discussions of the country's "end state" after Brexit, drawing criticisms that the government is "breathtakingly dysfunctional".
Speaking during a Treasury select committee hearing this afternoon, the chancellor admitted that conversations had not gone beyond "general discussions".
"The cabinet has had general discussions about our Brexit negotiations, but we haven’t had a specific mandating of an end-state position," he said. "That is something that will be done first in the sub-committee constituted to deal with this issue, and logically that will happen once we have confirmation that we have reached “sufficient progress” and are going to begin the phase two process with the European Union.
"We are not yet at that stage and it would have been premature to have that discussion before we reach that stage."
Update: A government spokesman has said cabinet will discuss the "end state" before Christmas.
But Labour MP and committee member Alison McGovern said his words were "beyond parody".
She added: "The government is flailing around trying to get agreement to move on to talks on the future UK-EU relationship. Yet they don’t even know what they want that relationship to be once they make that progress. They are breathtakingly dysfunctional."
Hammond also suggested the UK may still pay a exit bill even if there is no trade deal, for the sake of the country's international credibility.“I find it inconceivable that we would walk away from obligations that we recognise as an obligation," he told the committee.
He admitted that a “less favourable” Brexit deal - in other words, a no deal - would dwarf the cost of what the government is expecting to pay when it leaves. That figure is currently expected to be around £50bn.
This chimes with what government sources have previously told City AM - that the divorce bill is less a matter of pure finances and more a negotiating tactic being used to secure favourable terms for future trade.
But it was seized upon by Lib Dem leader Vince Cable as further evidence of cabinet splits. "Philip Hammond says we will have to pay the £50bn divorce settlement regardless of whether we land a trade deal, but I suspect the Brexiteers in the cabinet will have something fairly colourful to say about that. The most acrimonious divorce of all could be about to take place within the cabinet," he said.
"Ministers are behaving like a couple no longer on speaking terms but forced to live under the same roof."
“If the government wants talks do go through to the next phase, it must agree a negotiating position. It is time Theresa May showed leadership and told her cabinet that it is essential that Britain remains in the single market and customs union."
Hammond also confirmed the date of the next Spring statement - but insisted it's not a major fiscal event like the Budget.
The next date for your diaries is 13 March, he told the Treasury Select Committee this afternoon.
But Hammond said it would be used to respond to the latest OBR forecasts and set out some long-term thinking, ahead of the autumn Budget, rather than unveil any major new policy announcements.
He said the reason for cutting back the number of "fiscal events" was to make it easier for MPs to scrutinise policies, as well as making life easier for businesses.