Deep divisions in the heart of Government were exposed overnight when the Chancellor was accused by five sources in The Sunday Times of telling Cabinet colleagues that public sector workers are “overpaid”.
Mr Hammond would not deny he used that word when questioned on the BBC’s Andrew Marr Show.
“I’m not going to say what was or wasn’t said at a Cabinet meeting and it’s easy to quote a phrase out of context,” he said.
But he said the leaked comments were the result of the “silly summer season” and told his fellow ministers it would be “helpful” if they “focused on the job in hand”.
Appearing to allege he is being targeted, Mr Hammond, who backed Remain, claimed “some of the noise” around the Tory party has been “generated by people who are not happy” with his insistence that Brexit must be focused on “protecting our economy”.
Foreign Secretary Boris Johnson and Brexit Secretary David Davis, both Leave supporters, are at the centre of reports that senior Tories are positioning themselves to replace Theresa May as Prime Minister.
Mr Hammond said he would “certainly hope” there is no ongoing leadership contest at the top of Government”, adding: “If there is I’m no part of it.”
On public sector pay, the Chancellor described it as a “simple fact” that public sector workers are paid 10% more than private sector workers.
He has come under pressure to ditch the 1% cap on annual public sector pay rises following the General Election result, amid internal Government feuding on the issue.
The Chancellor described how public sector pay “raced ahead” of private sector wages following the 2008/09 financial crash, with both sets of workers now paid “about the same level”.
“But when you take into account the very generous contributions public sector employers have to pay in for their workers’ pensions, their very generous pensions, they are still about 10% ahead,” he added.
Despite the “premium” public sector workers enjoy compared with private sector employees, Mr Hammond insisted he was sympathetic to “all the issues that public sector workers are facing”.
He said: “You can’t eat your pension, you can’t feed your kids with your pension contribution.”
Mr Hammond denied another report he had told his Cabinet colleagues that driving trains is now so easy that “even a woman can do it”.
He said: “No, I didn’t and I wouldn’t say anything like that. I don’t think like that, I wouldn’t make a remark like that.”
Former Tory chancellor Lord Lamont warned the Cabinet would “collapse in chaos if there isn’t more collective unity”.
He told Sky News: “These discussions ought to be in private and briefing on this scale I think is actually… pretty unprecedented.
“It’s very dangerous – I think Cabinet ministers are playing with fire.”
The peer said it was “important the Prime Minister and the Chancellor support each other”.
Ex-Conservative leader Iain Duncan Smith also criticised the leaks, claiming it is “quite wrong” for senior ministers to be revealing the contents of Cabinet discussions.
He told Sky News: “The old story about a leak is… plug it. And the best way to plug it is to shut up and not go talking outside.
“Cabinet was meant to be private process and it’s quite wrong if Cabinet ministers are leaking stuff out. I know most of my colleagues and backbenchers do not want this to continue.
“There will be no leadership contest – they do not want one. We have a job to do, Theresa May has a job to do, you must remember Theresa May won the last election.”