Philip Hammond has refused to rule out Britain being part of a customs union with the European Union after Brexit.
The Chancellor, whose opposition to a hard Brexit has angered some of his colleagues, left the door open to the UK signing up to an agreement that could restrict international trade deals.
MPs have called on the Cabinet to urgently come to a decision about the key element of the upcoming negotiations with Brussels.
Hammond was asked by the Treasury select committee to "explicitly rule out the UK participating in a customs union with the EU as part of its end-state relationship."
The Chancellor sidestepped the question and insisted the Government would be "guided by what delivers the greatest economic advantage" to the UK.
A customs union would curb the need for border checks but could also restrict the trade agreements the UK could seek outside it.
Nicky Morgan, the chair of the Treasury select committee, said: "It was widely thought that being in a long-term customs union with the EU had been ruled out by the Government.
"But the Chancellor's letter confirms that this is not the case.
"It is vital that the Cabinet reach agreement on these central questions about the UK's future relationship with the EU, as a matter of urgency."