Phillip Hammond says Britain will '˜abide by its international obligations' when it comes to Brexit bills

Phillip Hammond’s comments came after a Lords report stated that Britain could legally walk away from the EU without paying a penny if there is no trade deal.

While it has been reported that the European Commission’s chief Brexit negotiator Michel Barnier is seeking a 60 billion euro (£52 billion) “exit bill” from Britain, the Lords EU Financial Affairs Sub-Committee said all estimates of the cost of withdrawal were “hugely speculative”.

The Chancellor said: “Obviously, this is a piece of negotiating strategy that we are seeing in Brussels.

“We are a nation that honours its obligations and if we do have any bills that fall to be paid we will obviously deal with them in the proper way.

“We are a nation which abides by its international obligations. We always have done, we always will do, and everybody can be confident about that.”

Mr Hammond rejected calls from a cross-party committee of MPs for the Government to give an immediate guarantee to the millions of EU nationals living in the UK of their future rights.

The Commons Exiting the EU Committee said the Government should act unilaterally and not wait for a reciprocal assurance over the position of British citizens in the EU.

The committee - whose members include Michael Gove who was co-chairman of the official Vote Leave campaign - said it was “unconscionable” they should have to wait up to two years when the negotiations conclude before their position is clarified.

The Chancellor told ITV’s Peston on Sunday: “We have to protect the couple of million British nationals who are living in the European Union.

“We have to get a fair deal for them as well.

“This isn’t about turfing people out, this is about the rights people have.”

Commons Leader David Lidington cautioned the Lords against amending the Brexit Bill to include a clause for a “meaningful vote” in Parliament at the end of the negotiating process.

He told BBC Sunday Politics show yesterday: “Parliament will get the chance to vote on the deal.

“Any idea that the PM’s freedom to negotiation is limited, any idea that if the EU 27 were to play hardball, that somehow that means that Parliament would take - try to reverse the referendum verdicts, and to set aside the views of the British people, that would almost guarantee that it would be much more difficult to get the sort of ambitious, mutually beneficial deal for us and for the EU 27 that we want.”

Mr Hammond has also criticised people calling on him to launch a spending spree on the back of borrowing as “reckless”.

Ahead of Wednesday’s Budget, Mr Hammond insisted he would not take a “confused” approach to public finances.

He wrote in a national newspaper: “While we are making steady progress in eliminating the deficit, there are still some voices calling for massive borrowing to fund huge spending sprees.

“That approach is not only confused, it’s reckless, unsustainable and unfair on our young people who would be left to deal with the consequences.”

The Chancellor said his approach would mean “flexibility ... throughout the remainder of this parliament to ensure our economic resilience”.

Responding to reports that Mr Hammond is seeking to put together a £60 billion “war chest” to deal with Brexit, Liberal Democrat leader Tim Farron said: “This shows that Hammond knows Brexit is going to send a torpedo through Britain’s finances.”