Theresa May suffers a major Brexit defeat on her plans to leave the customs union

  • The House of Lords on Wednesday voted for an amendment to the Brexit bill which means Theresa May would be forced to negotiate a deal which keeps Britain in the customs union.
  • The embarrassing defeat for the prime minister means the bill will now pass back to the Commons where rebel Conservative MPs are hoping to force a government U-turn on the customs union.
  • Defeat comes as pressure grows in Whitehall for a change in course.
  • May has previously insisted that customs union membership would “betray the vote of the British people” because it would limit Britain’s ability to strike its own free trade deals.

LONDON – Theresa May has suffered a major defeat on her plans to leave the customs union after peers voted for an amendment to the Brexit bill that could force the government to retain customs ties with the EU.

The House of Lords voted by a huge majority of 348 to 225 for an amendment to the European Union (Withdrawal) Bill which could force May to leave the door open for continued participation in a customs union with the EU.

The amendment, which will now pass back to the Commons would force “the United Kingdom to continue participating in a customs union with the EU.”

24 Conservative peers rebelled against the prime minister and joined with the opposition in supporting the amendment.

The scale of the defeat, on a record turnout among peers, is ominous for the prime minister, suggesting further defeats on other aspects of Brexit legislation are now highly likely.

The bill will now pass back to the House of Commons where a number of Conservative MPs have already joined with opposition parties in an attempt to force May to reverse her position on the customs union.

A spokesperson for the Brexit department said they were “disappointed” with the result.

“We are disappointed that Parliament has voted for this amendment,” a DExEU spokesperson said.

“The fundamental purpose of this Bill is to prepare our statute book for exit day, it is not about the terms of our exit.

“This amendment does not commit the UK to remaining in a customs union with the EU, it requires us to make a statement in Parliament explaining the steps we’ve taken.

“Our policy on this subject is very clear. We are leaving the customs union and will establish a new and ambitious customs arrangement with the EU while forging new trade relationships with our partners around the world.”

Why does May oppose the customs union?

The European Union’s customs union is a trade agreement between member countries who agree not to impose tariffs on each other’s goods and to impose common external tariffs on goods from outside the customs union. It means goods can move freely within the customs area without checks.

In February, Labour’s Brexit secretary Keir Starmer confirmed the party supported membership of “a” customs union on the basis that it was “the only way realistically” for the UK to retain tariff-free access to the EU, and limit the economic damage inflicted by leaving the single market. Membership of a customs union would also help to resolve the Irish border issue, which remains a looming problem in negotiations.

May suggested that such a deal would “actually betray the vote of the British people,” because it would limit the UK’s ability to strike its own free trade deals.

Some of her colleagues have different ideas, with cabinet ministers including Philip Hammond and Greg Clarke have reportedly started pressing for customs union membership. Around 10 rebel Tory MPs also appear likely to back a vote in favour of the customs union – and against the prime minister – on the basis they have sponsored a similar amendment to the Trade Bill.

The question is whether the government can persuade enough of those rebels to retreat.

Are MPs likely to vote for customs union membership?

“It’s not clear where some of these Tory waiverers stand. Whips will be working overtime to try and figure out the lay of the land,” said Professor Anand Menon, director at UK in a Changing Europe, a Brexit think-tank.

He said the issue was further complicated by the fact that some Brexit-supporting Labour MPs could vote with the government against their own party. “Labour might be whipped on it, but that wouldn’t stop Labour Brexiters from taking their own position, and some Labour Brexiters don’t want us in a customs union,” he said.

The government’s success in defeating the amendment will ultimately depend on progress in EU negotiations, Menon said.

“If the government is serious about defeating this amendment, it has to persuade some waverers that its own “bespoke” Brexit deal will fly – that we don’t need to be in “the” or “a” customs union to get what we want,” he said.

That, in turn, could depend on the tone of EU negotiators. If the EU Commission moves to rule out May’s vision of a “bespoke” customs arrangement before the vote, it will be hard for her to persuade Tory rebels to vote against the customs union amendment.

The fact the House of Lords voted in favour of the amendment is significant in itself, according to Baroness Smith, shadow leader in the House of Lords. She told an audience at an Institute for Government event on Monday that the Lords had voted for amendments to the Article 50 bill last year because they believed there was a majority in the House of Commons for them, and said peers also believed there was a majority for the customs union amendment, amongst others.

When will a vote be held?

May is unlikely to hold a vote on the amendment before local elections in May due to the risk of Tory infighting, said Professor Menon.

Beyond that, the date is anyone’s guess, although it could be before the EU Council in June, where the UK is expected to have made some progress on the Irish border issue. The vote would have to take place well before October, when the UK and EU expect to finish negotiating a deal on the terms of withdrawal.

What would a successful vote mean for Brexit?

The government’s thinking on the significance of the amendment remains unclear, but a Cabinet minister told the Independent on Wednesday that they could “live with” the amendment because it wasn’t “strictly prescriptive.”

That reflects the fact that the language of the amendment is somewhat vague: it would, in full, require “the government to lay before parliament a statement outlining the steps taken to negotiate an arrangement which enables UK to continue participating in a customs union.”

Membership of “a” customs union could be interpreted in a large number of ways – and it raises the prospect that the government could simply interpret the amendment as a mandate to negotiate the kind of “customs partnership” that she is currently seeking.

At any rate, Brexit watchers now believe May’s position on the customs union could be the next to reverse.

Mujtaba Rahman, managing director at the highly respected political consultancy Eurasia Group, told clients in an email last week that customs union membership is now the “basecase” because it is the only means by which to avoid the creation of a new internal border in the Irish sea between the UK and Northern Ireland.

Whether the amendment will be the blow which forces the issue remains to be seen.

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