Theresa May must take a tougher line with Brussels after making “errors” in her Brexit negotiation strategy, Jacob Rees-Mogg has urged.

The chairman of the influential European Research Group, tipped as a potential future Tory leader, insisted there was “no menace in me at all” over his actions.

But he claimed the Government had proposed “over-complicated” solutions to the customs problem and must be prepared to tell Brussels it will walk away without paying the almost £40 billion Brexit divorce bill – potentially leaving the bloc in the red.

On BBC1’s Andrew Marr Show Mr Rees-Mogg said Mrs May had made a mistake over her approach to the Irish border issue, one of the most contentious aspects of the negotiations, by ruling out the prospect of unilaterally keeping an open frontier after Brexit.

Mr Rees-Mogg said: “The Prime Minister said in her Mansion House speech that she wasn’t going to do this, I think that is a mistake.

“I think it is the obvious negotiating position to have. Bear in mind the Irish economy is heavily dependent on its trade with the United Kingdom, it is overwhelmingly in the interests of the Republic of Ireland to maintain an open border with the United Kingdom.

“I think, if you are going into a negotiation, you should use your strongest cards and just to tear one of them up and set hares running on other issues is, I think, an error.”

He said the Government’s plans for a “backstop” which would see the whole UK potentially tied to European Union rules in order to avoid a hard border – if no other way of solving the issue is possible – was “a real problem” and could leave the UK a “vassal state for an indeterminate period”.

Mr Rees-Mogg added: “Basically, the deal is very simple – we are paying a very large amount of money, £40 billion, and in return we want a trade deal.

“Everything else is essentially incidental to that.”

The UK should make clear to the EU that “if we don’t get the trade deal we want, you don’t get the money”.

Without the UK’s money the EU “faces a real crisis next March” – when the political situation in Italy meant it was already facing other problems.

Playing down his own ambitions, Mr Rees-Mogg insisted he believed Mrs May – “the most impressive and dutiful leader this country has had” – was “crucial to the Brexit project”.

“Of course I wouldn’t challenge Theresa May, that’s a ridiculous idea,” he said.

Former Conservative leader Iain Duncan Smith told Sky’s Ridge on Sunday that anyone plotting to overthrow Mrs May should “shut up” and get on with delivering Brexit.

Deputy Labour leader Tom Watson said no decision had yet been made on whether Labour MPs would be whipped to oppose membership of the single market when the Commons votes on the issue in June.

“We haven’t decided our whipping arrangements yet,” he said on ITV’s Peston on Sunday, adding: “We haven’t made a decision yet, but we’ve been pretty clear that there are deficiencies in the Norway model that might not work for a bespoke UK deal.”