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The government's former students tsar has issued a late-night apology to Philip Hammond after the MP threatened him with legal action.

Writer Toby Young issued the statement to the MP close to midnight after a bitter row over claims the former Chancellor made about a no-deal Brexit .

The issue erupted on Saturday when Mr Hammond repeated comments by Boris Johnson's sister, Rachel, about hedge funds that stand to benefit from no-deal.

Mr Hammond, one of 21 Tories who lost the whip for trying to block no-deal, wrote: "As [the PM's] sister has reminded us, he is backed by speculators who have bet billions on a hard Brexit.

"And there is only one outcome that works for them: a crash-out no-deal Brexit that sends the currency tumbling and inflation soaring."

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(Image: AFP/Getty Images)

The allegation has been prominent for around three weeks following an article by the Byline website.

The Byline article highlighted donations to the Tories by financiers who are also betting against - 'shorting' - certain firms or aspects of the economy.

It is certainly true that some financiers taking short positions have donated to the Tories or Boris Johnson . Crispin Odey, who made £220m overnight as sterling slumped in the 2016 referendum, is one, and the Mirror has reported on him previously.

However, fact-checking website Full Fact said the Byline article had used incomplete data and it was unable to identify a sharp rise in short positions that was alleged.

The Financial Times also argued the full picture was more complicated, with financiers taking many positions at one time and not only betting over Brexit.

(Image: Jeff J Mitchell)

Mr Young, however, not only said the theory was untrue but went a large step further.

In a now-deleted tweet, he described it as "Hammond's disgusting anti-Semitic conspiracy theory: Boris is being manipulated by a secret cabal of city financiers who stand to profit from economic ruin."

Mr Hammond's original article on Saturday did not mention Jews or Judaism.

The former Chancellor hit back sharply, saying: "This is self-evidently absurd.

"But it is also defamatory. I will be taking legal advice tomorrow morning. I shall make no further comment."

Mr Young then deleted his tweet and apologised to the former Tory MP.

He wrote: "Apologies Philip.

"The suggestion that “speculators” are controlling the govt could be construed as an anti-Semitic trope if “speculators” is being used as a euphemism for Jewish financiers, as it sometimes is.

"But you evidently didn’t mean that and I’ve deleted the tweet."

Young came under scrutiny last year over his short-lived appointment as a board member of the government’s new universities regulator, the Office for Students.

He was forced to stand down after nine days in the job over crude social media comments, including jokes about women’s breasts.