* Trade minister says opposition plan would stifle dealmaking
* Government says customs union would waste one of the key prizes of Brexit
* Former trade official mocks government position (Releads after speech)
LONDON, Feb 27 (Reuters) - Britains trade minister Liam Fox attacked the opposition Labours party plans to remain in a customs union with the European Union on Tuesday, calling it a betrayal of the millions of people who voted for Brexit.
In a speech outlining how Britain can make a clean break from the EU without damaging the economy, Fox said that staying in a customs union would leave the country in a worse position than now and would be a sellout of Britains national interests.
The opposition Labour party tried to outflank the government by arguing on Monday that Britain should stay in a customs union with the EU, potentially setting up a major test of Prime Minister Theresa Mays fragile parliamentary authority.
Fox, a long-standing eurosceptic, said the ability to strike new trade deals around the world is one of the key prizes of Brexit, and that if Britain stays in a customs union with the EU it will have to accept EU rules without any say in making them.
"We would be in a worse position than we are today. It would be a complete sell-out of Britains national interests and a betrayal of the voters in the referendum, Fox said in a speech in Londons financial district.
He criticized the EU, saying that in many areas of global trade, in particular services and digital industries, it had been unable to keep pace with change.
But the former most senior government official in Foxs department compared leaving the EUs single market and customs union to being like swapping a three-course meal for a packet of crisps.
Martin Donnelly, the former permanent secretary at the Department for International Trade, said Britain risked being shut out entirely from its biggest market.
Youre giving up a three-course meal - the depth and intensity of our trade relationship across the European Union and partners now - for the promise of a packet of crisps in the future, if we manage to do trade deals in the future outside the EU, he told BBC radio.
In the latest major speech laying out the governments plans for Brexit, Fox was instead forced to fend off criticism from the Labour party.
Labours announcement on Monday places Mays government on a collision course with a number of her own members of parliament, who are planning to back an amendment to a trade bill calling for the government to pursue a customs union, and will now have the backing of Labour.
Eight Conservative rebels are backing the amendment and, if they win more support from colleagues, the government could be defeated in parliament on one of its key Brexit policies.
(Editing by Stephen Addison)