The former chancellor – now sitting as an independent – sided with Labour on the crucial issue, arguing it would avoid the damage to the union threatened by the current deal.
Mr Hammond also argued a customs union would reduce the continuing risk of a no-deal Brexit at the end of 2020, if no trade deal has been struck by the end of the short transition period.
“Yes, I could support a customs union,” he told Sky News, arguing it would “overcome the problem” in the prime minister’s deal.
Mr Hammond’s move lays bare the reason for Mr Johnson’s refusal to allow full scrutiny of his “paused” Withdrawal Agreement Bill and push for a general election instead.
No 10’s biggest fear is a cross-party push for a customs union which would lead to hardline Tories withdrawing their support for the bill and split the party again.
The former chancellor warned Mr Johnson’s deal “splits Northern Ireland” from Great Britain, saying: “If the whole of the UK is in a customs union, then the whole of the UK would be treated the same and the threat to the union in Northern Ireland would be gone.”
And he pointed to the risk of a crash-out Brexit, adding: “That applies as much to a no-deal exit at the end of 2020 as it does to a no-deal exit at the end of 2019.”
On Saturday, a government minister heightened fears of a “trapdoor” in little over a year – if a hard Brexit is pursued – admitting no deal would ‘always” be an option.
Mr Hammond also rejected Mr Johnson’s push for a 12 December election, saying: “I shall be voting against it – this is not the time for a general election.
Instead, he called for “proper scrutiny” of the bill, adding: “The government should stop making threats, stop throwing tantrums and get on with the grown-up business of doing its business.”
The former chancellor also confirmed he planned to stand as an independent at the next election, if the Tory whip is not restored, saying: “That’s my intention, yes.”
He said: “I am not going to change what I say, what I believe, is important about Britain’s future in any kind of attempt to sneak back in.”
However, Mr Hammond backed away from support for a Final Say referendum to decide the Brexit outcome, despite previously describing the idea as “coherent”.
“Saying that it’s a coherent proposition that deserves to be considered is not the same as saying I would back it,” he said.
“I don’t think repeating the question is the right way forward. I think a compromise deal is the right way forward.”
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