The Prime Minister announced earlier this year the split would definitely involve leaving the single market and customs union so Britain is free to negotiate its own free trade deals around the world.
But a cross-party alliance of Lords, including Tory rebels, put forward to an amendment to the Government’s EU Withdrawal Bill and voted by 348 to 225 in favour of changing the landmark legislation.
In a major defeat for Mrs May’s Government, the amendment is worded in such a way which could compel her to at least attempt to negotiate terms for a customs union arrangement, then report back to parliament.
Pro-Brexit peers have reacted angrily to the vote, with former Conservative cabinet minister Lord Forsyth branding it “an attempt to create division and confusion” in the Commons.
He said: “What is going on here is an exercise by Remainers in the House who refuse to accept the verdict of the British people and I believe they are playing with fire.”
He warned changes to such a major piece of legislation by the unelected Lords were “putting the peers against the people”.
Speaking for the Government, Lord Callanan said: “We have set out our two potential options for a future customs relationship with the EU, but these amendments would send a signal that the Government won’t seek to negotiate them and instead pursue an outcome the Government has ruled out.”
The amendment’s sponsors included former Tory party chairman Lord Patten of Barnes and former UK ambassador to the EU Lord Kerr of Kinlochard.
Brexit news: The House of Lords has voted through its customs union amendment
The House of Lords voted by a majority of 123 to change the Government’s Brexit Bill
A statement issued by the Department for Exiting the European Union said the ministry was “disappointed” by the vote.
It 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 leave the customs union and will establish a new and ambitions customs arrangement with the EU while forging new trade relationships with our partners around the world.”
Lord Kerr said businesses want a customs union
Lord Kerr was the diplomat responsible for drawing up Article 50, the legal mechanism for Brexit.
Opening the debate this afternoon, he insisted businesses want a customs union.
He told peers his amendment was phrased in such a which would require the Government to negotiate for a customs union deal.
The Government would then need to explain to Parliament what it had done to try and secure it.
The House of Lords vote is likely to reignite the debate over the UK’s customs union membership
It would then ultimately be up to the EU to decide whether it wants to accept the terms, he said.
Those in favour of the amendment insisted it would benefit Britain.
Crossbench peer Lord Bilimoria said the change was needed to limit the damage caused by Brexit by keeping the UK in a customs union.
Labour’s Baroness Hayter of Kentish Town said the change was “good for the governance of this country” and would save the economy £24billion over the next 15 years.
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But UKIP Deputy Leader, Mike Hookem MEP lashed out at the House of Lords, branding the upper house of Parliament an “an unelected nest of vipers who seem determined to reverse the EU referendum result”.
He said: “Keeping the UK in the Customs Union is an absolute betrayal of Brexit, and the Lords know this.”
“Under the proposals, the UK would have to continue to pay millions each week into the EU; continue with open borders for EU citizens; continue to implement EU law, and, most worryingly, join the developing EU army framework known as PESCO.”
“I am in no doubt that the vast majority of the 17.4 million people who voted to leave the EU will be absolutely disgusted by the subversion of our democracy in the Lords today.”
But the wording of the amendment could mean it does little to change the Government’s course.
Ahead of the vote, former Brexit Minister David Jones said: “This amendment will generate lots of smoke but not much fire.
“We must leave the customs union in order to negotiate trade deals… and this amendment would not stop that.
“It merely asks the government to make a statement on its policy, which, since the policy is well known and very clear, can be easily done.”
But despite the amendment’s limited ability to change the Government’s policy, it is likely to reignite the debate over whether Britain is better off inside a newly-negotiated customs union or free to forge its own trade deals.