The Treasury has been accused of owing a six-figure sum over previous flights made with No 32 (The Royal) Squadron, and until that bill is settled Ministry of Defence (MoD) officials who take VIP bookings have allegedly been ordered to to refuse any more travel requests.
Mr Hammond has used BAe 146 jets and A109 helicopters from the squadron on more than 20 official business-trips this year. He has taken flights to Manchester, Brussels and Frankfurt.
“At the same time as claiming our brave armed forces don’t need any more money and that the army only needs 50,000 troops, it is a huge double-standard to willingly use the armed forces’ facilities at the same time as refusing to pay for them,” an MoD source told The Times, which originally reported the story.
The ban comes as Defence Secretary Gavin Williamson is preparing to push back against potential financial cuts to the armed forces, after the Chancellor reportedly told Theresa May the army could cope with 50,000 troops, down from its present strength of 77,400.
Some Conservative MPs have threatened to resign if the number goes below 70,000. Junior defence minister and former soldier Tobias Ellwood expressed “deep discomfort” at the cost-saving plans.
A source at the Treasury told The Independent any ban would be a “low-key administrative issue” and the two departments are working to resolve it.
Mr Williamson, a former chief whip and close ally to Ms May was seen by some commentators as a controversial appointment to the Cabinet.
The 41-year-old, who keeps a tarantula called Cronum on his desk, has been nicknamed the “baby-faced assassin” by some.
As Chief Whip, he was said to have played a key role in the sacking of his predecessor Michael Fallon after claims from several female journalists that he had behaved inappropriately towards them.
Mr Williamson himself is also facing pressure from his own party’s MPs to ensure the proposed cuts to the defence budget do not take place.
Mr Hammond used an RAF plane earlier this week and is expected to be allowed one on Friday if a planned trip to Europe goes ahead. It is thought the alleged ban would then come into effect until the bill is paid.
Some have blamed administrative delays for the lack of payment and the Treasury is said to be preparing to expedite the payment.
The MoD told The Independent it was neither confirming or denying the reports.
Register for free to continue reading
Registration is a free and easy way to support our truly independent journalism
By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists
Already have an account? sign in
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies