Lords Defeat May on Customs Union in Test of Brexit Plans

(Bloomberg) -- The U.K.’s upper house voted against a key part of Prime Minister Theresa May’s Brexit policy, inflicting a defeat on the government that could eventually push it toward keeping closer ties with the European Union.

The defeat by a margin of more than 100 votes was on an amendment pressing May to seek a post-Brexit customs union with the EU. It’s the first vote the premier has lost in the upper chamber on her European Union (Withdrawal) Bill, and her Labour opponents anticipate winning further votes during its passage through the upper chamber.

Lords Defeat May on Customs Union in Test of Brexit Plans

While the government doesn’t interpret the amendment as binding, the heavy defeat may signal problems ahead.

For starters, there is the scale of the defeat. It could embolden members of her Conservative Party in the elected House of Commons who want to soften Brexit. Once it has cleared the Lords, the bill returns to the lower chamber, where there’s probably a majority who favor a customs union that is now also the official policy of the main opposition party.

The prime minister “must now listen to the growing chorus of voices who are urging her to drop her red line on a customs union and rethink her approach,” Labour’s Brexit spokesman, Keir Starmer, said in a statement after the vote.

Pro-EU Tories are feeling emboldened. Lawmaker Anna Soubry, a former Conservative business minister who has put her name to amendments to other bills in the lower chamber pushing for a customs union, retweeted a Twitter post saying “Lords batter the govt.”

She earlier co-authored an article in London’s Evening Standard newspaper with former Tory Chairman Chris Patten, one of the sponsors of the Lords amendment, that described staying in a customs union as “the best way to support our trade both within Europe and beyond.”

“There are times in one’s political career when what is alleged to be party loyalty comes way behind trying to stand up for the national interest,” Patten said during the debate that preceded the vote. “In doing that I think I will be repeating what I would have been able to say with the full support of my party for most of the time I’ve been a member of it.”

May was later defeated on a second amendment that binds the government to bring in added protections for workers rights, environmental protections and consumer standards that stem from EU law currently in place.

May’s Bind

May has rejected staying in the customs union as it would prevent Britain pursuing an independent trade policy, which for the most enthusiastic Brexit supporters in her party is a crucial benefit of leaving the bloc. If she reneges on that, she risks a leadership challenge.

“We have set out our two potential options for a future customs relationship with the EU,” Brexit Minister Martin Callanan told the upper chamber before the vote. The amendment “would send a signal that the government won’t seek to negotiate them and instead will pursue an outcome that the government has ruled out.”

After the vote, the Department for Exiting the European Union said it was “disappointed” by the result, but that the government doesn’t feel bound to change its policy.

Further Defeats Possible

The cross-party amendment passed by 348 votes to 225. As well as Patten, it was sponsored by Labour’s Brexit spokeswoman in the Lords, Dianne Hayter, Liberal Democrat Sarah Ludford, and John Kerr, an independent who helped draft the Article 50 clause that governs the Brexit process.

After Wednesday’s sittings, the bill has five more sessions in the Lords through May 8 before returning to the Commons. Labour sees a chance of beating May on eight issues, including the customs union and critically -- the government’s desire to set Brexit day in stone on March 29, 2019.

©2018 Bloomberg L.P.