All parties “want a deal” to resolve the Northern Ireland Protocol impasse but “there is a large gap to be bridged”, Northern Ireland Office minister Steve Baker has said.

Mr Baker told MPs “there is no deal on the table” but “we simply must make progress on the protocol”, adding that he hoped the exchange “will be heard in the EU”.

Members of the DUP spoke out in opposition to the protocol, with leader Sir Jeffrey Donaldson warning his party was not prepared to tolerate a situation where Northern Ireland is treated like “an EU colony”.

The exchanges came as MPs approved all Commons stages of the Northern Ireland Budget Bill to authorise resources for public services in Northern Ireland for the years ending March 31 2023 and 2024 in the absence of a functioning devolved Northern Ireland Assembly and executive.

The Bill will undergo further scrutiny in the House of Lords at a later date.

Mr Baker, speaking during the Bill’s second reading, said: “At the moment, I think the sense is amongst all parties, whether it’s the government of Ireland, or whether it’s the parties represented here in the House, whether it’s Government ministers or the European Union, we all want a deal, we want to move on.

“We want a deal which respects the legitimate interests of unionism, which keeps the whole UK together and out of the EU, which respects the Act of Union and so on, and my sense is that through much-improved constructive relations between the UK and Ireland and the EU, we may well be able to get a deal.

“But I have to say to people watching this, right now, today there is no deal on the table, there is a large gap to be bridged and we are working intensively to do just that.”

His comments came as Labour’s Karin Smyth (Bristol South) intervened, asking: “The very least the Government could do is advise us as to how quickly they are going to actually resolve the issues around the protocol, so that the parties can get back around the table because the two things are not separable.”

Mr Baker said “we simply must make progress on the protocol”, adding he hoped the exchange “will be heard in the EU”.

He said: “We are in a position where we simply must make progress on the protocol and as we approach the anniversary of the Belfast Good Friday Agreement, I really hope that this exchange will be heard in the EU, because we all want to be able to celebrate that agreement, 25 years of peace, we want to be able to celebrate it with the executive up and running.

“Members opposite in the DUP have made it very clear what is on the table at this time and I think it’s a moment of considerable gravity for us all, but in terms of the real effects on everyday people in Northern Ireland, yep, I am acutely aware.”

Shadow Northern Ireland secretary Peter Kyle said: “It’s (the Bill) needed to allow public services to function in Northern Ireland and we on this side will not oppose it.”

He added: “Let me just remind him and others – in fairness to the DUP, they were raising these concerns about the protocol from a position within devolved administration long before they withdrew…

“There was a fantastic six-month window of opportunity from which to resolve these issues before the executive collapsed and that is the missed opportunity which has led us down this path that we find ourselves today… I cannot forgive the negligence that allowed this state of affairs to emerge in the first place.”

Sir Jeffrey warned: “The democratic deficit in Northern Ireland is something that’s very real to the Northern Ireland Assembly and executive and is one of the fundamental reasons why we don’t have functioning political institutions because this party is not prepared to tolerate a situation where we are treated like an EU colony.”

DUP MP Ian Paisley (North Antrim) said: “It is now two years since the protocol came into effect and the Government has still failed to fix the problem of the protocol.”

He added: “If you break it, you fix it, and by signing up to the protocol the Government broke the institutions first created by the Belfast Agreement. Rather than asking unionists in Northern Ireland to do the political impossibility, it should feel that it, the Government should face up to its own responsibilities.

“The budget will pass this House tonight, but very soon the constitutional no man’s land must come to an end.”

The protocol was agreed by the UK and EU in 2019 as a way to unlock the logjam over securing a Brexit withdrawal agreement.

Designed as a means to keep the Irish land border free-flowing, it moved regulatory and customs checks on goods to the Irish Sea, creating economic barriers on trade between Great Britain and Northern Ireland.