Keir Starmer risks re-igniting a row with members of his cabinet after he signalled the UK is prepared to “get closer” to the European Union to undo the harm caused by Brexit.
The prime minister said Britain should align itself more closely with the EU single market when it is in the national interest, adding “we should go that far”.
But he poured cold water on the idea the UK should rejoin a customs union with the bloc, days after his health secretary Wes Streeting said the arrangement had "enormous economic benefits".
Sir Keir said there was too much water “under the bridge”, particularly after the UK signed trade deals with the US and India which would potentially have to be unravelled for there to be any customs union deal.
But he said the UK could go “further” on the single market.
In an interview with the BBC's Sunday with Laura Kuenssberg show, the PM pointed to steps agreed last year to align the UK more closely with the EU on agriculture and food, adding: "That's the sovereign decision that we have taken.
"I think we should get closer, and if it's in our national interest to have even closer alignment with the single market, then we should consider that, we should go that far."
He added: "I think it's in our national interest to go further.”
On the idea of a customs union, he added: "I do understand why people are saying 'wouldn't it be better to go to the customs union?' I actually think that now we've done deals with the US which are in our national interest, now we've done deals with India which are in our national interest, we are better looking to the single market rather than the customs union for our further alignment."
But the prime minister ruled out a return to freedom of movement, a key principle of the EU’s single market, although he pointed to plans for a new scheme to allow young people to come and work in the UK, and vice versa, for a set period of time.
In response, shadow foreign secretary Priti Patel accused the Labour leader of a “Brexit betrayal”.
"In a desperate bid to appease his backbenchers, Keir Starmer is pursuing alignment with the single market - surrendering our freedom to cut regulation and strike our own trade deals," she added.
Before Christmas No 10 was forced to say the PM was “very happy” with his cabinet after Mr Streeting’s comments.
In what was seen as a direct challenge to Sir Keir, the health secretary said a “deeper trading relationship” with Europe would boost UK economic growth.
The Labour leader has pledged a “reset” of UK-EU relations but has rejected calls to rejoin the group or become part of its single market or customs union.
However, in recent weeks Labour ministers have begun to talk more about the economic costs of Brexit.
A recent analysis, seen by The Independent, revealed that the EU is costing the UK up to £90bn a year in lost tax revenues.
On Sunday the Lib Dems announced they will try to force a new Parliamentary vote on a customs union, by tabling an amendment to the EU Reset Bill, expected to be brought forward by the government in the coming weeks.
At the start of December more than a dozen Labour MPs voted with the Libs to call on the government to open talks on a new EU-UK customs union.
Lib Dem leader Ed Davey said: “Businesses are drowning in red tape and families are paying the price for the appalling Brexit deal left by the Conservatives. But so far the Labour government has been far too timid, only tinkering around the edges when it comes to rebuilding our ties with Europe.”
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