UK-EU Customs Union

Lord Lilley Excerpts

Thursday 29th January 2026 Lords Chamber

[Lord Lilley (Con)]

My Lords, it is a great pleasure to follow the noble Lord, Lord Docherty of Milngavie, to congratulate him on his excellent and witty speech and to welcome him to your Lordships’ House, where he will no longer have to depend on the votes of his opponents or anybody else to retain his seat.

The noble Lord was very modest in his speech and did not mention his professional career as chief executive of Tees Valley Regeneration and executive director of the Home Group, one of the biggest UK social enterprises. He also did not mention his passion for the arts, which I look forward to hearing about in future speeches. He was a founding trustee of the Baltic gallery in Gateshead and commissioned Anish Kapoor’s Temenos in Middlesbrough, which features on the British passport. He was also a trustee of Arts Council England. In an interview last year, he said:

“What gives me joy … is when I have been involved in recruiting people who have gone on to excel and grow in their roles”.


He has excelled and grown in his roles up to now and will continue to do so, no doubt, in your Lordships’ House.

As far as trade relations are concerned, Britain is to the EU much as Canada is to the United States of America. We both have free trade agreements with zero tariffs and zero quotas with our large continental neighbour. Neither Britain nor Canada has a customs union or a single market requiring it to adopt the tariffs and all the product laws and standards of its large neighbour. Yet I know of no Canadians who, even pre-Trump, ever advocated Canada joining a customs union, still less dynamically aligning its laws and standards with those of America.

Can the noble Lord, Lord Newby, tell us why a customs union or single market is good for Britain but would be bad for Canada—or vice versa? Why did he not tell us that a customs union would require Britain to reinstate the over 2,000 tariffs on goods that we do not produce, which we abolished when we left the EU? Why should British consumers pay higher prices to protect inefficient EU producers? For example, since Brexit we have allowed a tariff-free quota of sugar, which costs $449 a tonne coming from Brazil. Back in the customs union, it would cost us $892 per tonne from France. Vote Lib Dems for higher prices. A customs union would also mean scrapping our trade agreements with the Pacific trade pact, the largest grouping by GDP in the world, and with India, the largest country by population, with which our trade deal has important service industry chapters.

The sole benefit of a customs union is that it avoids the need for declarations of origin. The Swiss calculate that these cost less than 0.02% of the value of their trade with Europe. Hence Switzerland, like Norway and Iceland, refuses to join the EU customs union. Turkey does have a customs union with the EU, but that means that when the EU negotiates a free trade deal with another country, Turkey has to remove its tariffs on that other country’s goods, but the other country does not have to remove its tariffs on Turkey’s goods. Is that what the Lib Dems want?

I was the Trade and Industry Secretary who oversaw Britain’s entry into and creation of the open market back in 1992, and I assumed it would benefit our trade. I also negotiated the Uruguay trade round, the last successful world trade agreement, which halved tariffs and created the WTO. I made bullish speeches about how both of these, particularly the single market, would boost British exports. A quarter of a century later, a study showed how British exports had actually fared. I confess it proved that I had been wrong. Britain’s goods exports to the single market stagnated over nearly 25 years, growing by less than 1% a year. By contrast, our goods exports to more than 100 countries with whom we traded solely on WTO terms grew fourfold, by 87%.

I have long been at a loss to explain why anyone should want to return to a relationship with our former partners that was of so little benefit to us and would involve handing back control of our laws and our tariffs and paying for the privilege of doing so, but a psychotherapist friend explained to me that people who have escaped from a long-term coercive relationship often have an irrational urge to return to the partner who controlled their lives, dictated how they spent, made them subject to detailed and unnecessary rules and restricted their relationships with anyone else. I think we should be understanding of the noble Lord, Lord Newby, and, indeed, the Government’s European Minister as they endeavour to recover from this syndrome, and gently point out that others who once succumbed to coercive control from the EU, such as the National Farmers’ Union, now warn against returning to the ban on gene-edited crops and bovine TB vaccines and ending the ban on live animal exports. The City now wants to be excluded from any reset and has allegedly, according to the Financial Times, persuaded the Government that that would be right. The AI industry rejoices in escaping from the stifling controls of EU law. I wish the Lib Dems and their friends on the Labour Benches a speedy recovery from their addiction to coercive control.

--- Later in debate ---

[Lord Liddle (Lab)]

My Lords, it is a great pleasure to welcome my new colleagues who are making their maiden speeches today—my noble friends Lady Gill and Lord Docherty, my good friend who is to come later, and my noble friend Lord Doyle, who is a very close friend and from whom we have just heard an excellent maiden speech. I first came across my noble friend 30 years ago, when he had just arrived in Westminster and was working for the newly elected Labour MPs for East Anglia. He was so keen on this job and he was homeless, so he camped out in Charles Clarke’s office while he sorted out his personal affairs. He always had that trademark, and he has kept it: he is the man with the duffel coat. He always reminds me, whenever I see him, of Paddington Bear. In a way, that is appropriate, because he is a man of great culture and a real expert on film, so he will bring great wisdom on cultural questions to this House.

In the past 30 years since I first met my noble friend, he has done a great variety of very interesting things. He has worked intimately with some of the most consequential people on the centre-left of British politics: first for Tony Blair in No. 10 and then in his role as Middle East peace envoy, then for David Miliband—Labour’s lost leader—in his role with the International Rescue Committee, and finally for Keir Starmer. Working for Keir Starmer, he was not one of the fast-rotating group of people who have been in and out of No. 10; he was a crucial aide. I do know how many people know this, but he sustained Keir Starmer at what was the deepest crisis point of his leadership of the Labour Party after the loss of the Hartlepool by-election in 2021. When he worked on the Batley and Spen by-election, he persuaded Kim Leadbeater, Jo Cox’s sister, to be our candidate and we squeezed home by 300 votes. That is probably one of the most consequential acts of his political career. In his three decades of politics, has shown outstanding loyalty to the bosses he has worked for.

My noble friend is a very considerable person. He is a man of faith who has struggled with some of his inner tensions and conflicts and overcome them. He brings to this House much more than the experience of a press officer; he is well informed across a wide range of national and international issues. He is a committed lifelong social democrat and he is going to make a great contribution to this House.

On the subject of the debate, I will not delay the House long, but I will say this. I have great respect for the intellect of the noble Lord, Lord Lilley, but I have never heard such rubbish on the question of Europe. He referred to his role in the Uruguay round. Let me remind him, it was the European Commission that negotiated the Uruguay round.

[Lord Lilley (Con)]

In fact, it was jointly negotiated by member states and the European Commission. I was there for all nine days of the negotiations in the Heysel stadium, so the noble Lord is wrong.

[Lord Liddle (Lab)]

Do you know why we won the Uruguay round? It is because we had the strength of the bloc of the European Union behind us. It was not just something that Britain achieved on its own.

Secondly, the noble Lord talks about the stagnation in our export of goods and completely ignores the vast expansion of our trade in services with the European Union, which is being put at risk by increasing barriers. He neglects the fact that, in 2016, the British public were promised a growth miracle as a result of leaving the EU. Where are the benefits of all that loosening of rules that were supposed to happen? We were promised the end of free movement, and what did the Conservatives do? They went on to create the biggest inward movement of people into this country we have ever seen, so what hypocrisy they have talked on immigration. If we had stayed in the single market and in Europe, the growth we would have seen as a result would have meant that none of the tax rises that we needed to have since the 2024 general election would have been necessary. Those are facts.

The economic situation is getting worse as we lose the strength of the European bloc. We no longer have the competitive pressure of the single market, which is what makes business efficient. As we lose that competitive pressure, we will find that Brexit is not a one-off loss; it will affect our competitive position for years to come.

I said I would not talk for long, but may I just make one point? We should look at the customs union and try to speed up the reset. I agree with the noble Lord, Lord Hannay: we need independent expert advice on what we would try to achieve and how. This is something of great complexity. We need to look objectively at the consequences of having an independent trade policy. I do not think they are very considerable, but I am willing to be proved wrong in an independent expert inquiry, which I hope Keir Starmer will set up.