Blow for Theresa May as peers vote for UK to stay in customs union after Brexit
Peers have delivered a blow to Theresa May by decisively backing moves to keep Britain in a customs union with the European Union after Brexit.
In a major defeat for the Government, the House of Lords voted by 348 to 225 in favour of an amendment to the EU Withdrawal Bill urging ministers to seek such a deal with Brussels.
Supporters of maintaining tariff-free trade with the EU after Brexit hope that the size of the majority - 123 - will make it harder for the House of Commons to overturn the Lords' decision.
Peers also inflicted a second defeat on the Government on an amendment to restrict the use of so-called 'Henry VIII clauses' to water down existing EU rights when they are transferred into UK law.
The Government defeats came as peers began the report stage of the bill, with a raft of proposed amendments due to be considered over the next three weeks.
Crossbench peer Lord Kerr, one of the backers of the amendment, said: "It will be very hard not to see a fall in overall exports if our trade with the EU is made more complicated, and it will be much more complicated if we don't have a customs union.
"We must try to limit the damage of leaving our biggest trading market."
He added: "If we do leave, it should be in a way that limits the damage done to the country's wellbeing and the future of our children. That's why I believe it makes sense to ask the Government to explore a customs union."
But eurosceptic Tory peer Lord Forsyth accused supporters of the amendment of trying to overturn the result of the referendum.
He said: "This bill has nothing to do with a customs union. What is going on here is an attempt to get the House of Commons to look at this issue again and create division among those people who wish to support the views of the British people.
"We are an unelected House. This is part of a campaign that is putting peers against the people. The people set out very clearly that they wish to leave the EU, which means leaving the customs union as well.
"What is going on here is an exercise by Remainers in this House who refuse to accept the verdict of the British people."
Shadow Brexit minister Baroness Hayter said "there was no mandate for a hard Brexit" and claimed leaving the customs union would cost the UK economy £24bn over the next 15 years.
But Brexit minister Lord Callanan said leaving the customs union would enable Britain to strike trade deals with other countries while maintaining "as frictionless trade as possible" with the EU".
Shadow Brexit Secretary Keir Starmer said the passing of the cross-party amendment was “an important step forward”.
“Labour has long championed the benefits of a customs union as the only viable way to protect jobs, support manufacturing and help avoid a hard border in Northern Ireland after we leave the EU,” he said.
“That is why we have called on the Government to negotiate a new comprehensive UK-EU customs union after Brexit as part of a close future relationship with the EU.
“Theresa May must now listen to the growing chorus of voices who are urging her to drop her redline on a customs union and rethink her approach.”
But a government spokesperson said: "We are disappointed that Parliament has voted for this amendment.
"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."
Meanwhile, peers voted by a majority of 97 to limit the use of secondary legislation when it comes to transposing EU worker and consumer rights into UK law.
The Labour amendment - which won cross-party support - said ministers must use primary legislation or at least greater scrutiny if they try to water down employment, equality, health and safety, consumer or environmental standards.
Elsewhere, ministers have also announced a key concession over part of the bill in a bid to head off a rebellion.
An amendment in the name of crossbench peer Lord Patel calls for greater certainty that clinical trials will not be affected by Britain leaving the EU.
At the moment, medical experts fear that rules governing medical research - known as Clinical Trials Regulation (2014/536) - will cease to be effective unless action is taken to ensure it is covered by the bill.
Lord Patel's amendment, which has cross-party support, says the regulation must be "deemed to be operative immediately before exit day, and therefore it forms part of retained EU law".
It is understood that government ministers will give an assurance that the regulation will be transferred into UK law after Brexit, thereby ensuring vital research can still go ahead.
In response, the peer has agreed to withdraw his amendment.