UK-EU Customs Union

Lord Verdirame Excerpts

Thursday 29th January 2026 Lords Chamber

[Lord Verdirame (Non-Afl)]

My Lords, I, too, welcome and congratulate today’s four maiden speakers. We very much look forward to their future contributions.

While there have been statements by the Government on the relationship with the EU, we have not had a comprehensive policy statement setting out their objectives in the negotiations. A paper on the defence partnership was published on the same day as the UK-EU common understanding. Similarly, the Cabinet Office policy paper on the internal electricity market last December dealt with the outcome of discussions with the EU. However, we are not here just to debate outcomes; we are here to scrutinise and seek to influence government policy. To do so, we need to understand what that policy is. Will the Government commit to publishing a comprehensive policy statement on negotiations with the EU similar in detail to, for example, the July 2021 Command Paper on the renegotiation of the Northern Ireland protocol?

As for the case for rejoining the EU customs union or parts of the single market, I will make three brief comments. First, any such decision, now that we are out, would be very different from the decision to leave the European Union, and the dividing line will not be the same as in the referendum. We are too large an economy to join a bloc in which we would have no say. Reference was made by the noble Lord, Lord Newby, to Mark Carney’s fine speech in Davos, but I do not see how rejoining the customs union would fit in with that speech. His argument is not that middle powers should tie themselves to bigger powers; it is the opposite of that. Middle powers should maximise their autonomy and influence through flexible and variable arrangements in which they retain a say with a wide range of powers. By all accounts, we are a bigger middle power than Canada and less dependent on the EU than Canada is on the United States.

Secondly, the European Union faces complex and decisive choices in the years ahead. As Mario Draghi warned, doing nothing or doing too little means accelerated decline. In recent interventions, he has complained that little has changed since his report and that conditions are worsening. What would this mean for us if we chose to join a customs union or parts of the single market now? It would put us, I am afraid, in a bleak position. Either we would have joined a bloc that fails to meet the challenge and declines faster, or, if the EU takes bold and transformative decisions, we would have joined that bloc just before those decisions are taken and without any ability to influence them.

My final point is on reports about a so-called Farage clause that the EU would be seeking as part of its reset—a penalty provision on future renegotiations. As some will remember, in particular the noble Lords, Lord Frost and Lord Barrow, a similar proposal was made in December 2020. It had a different name then; it was called the hammer clause. Imagine if the hammer clause had been agreed by the then Government. The Government today would have a weaker hand in their discussions with the EU. A penalty clause or mechanism will affect any future Government, whatever their colour, including a Liberal Democrat Government seeking to rejoin the European Union, because if there is one thing we can be certain of, it is that there will always be negotiations. We negotiated on the way in, we negotiated while we were in, we negotiated as we came out and we are still negotiating. Does the Minister agree that it would be reckless and irresponsible for any Government today to weaken the negotiating position of a future Government? Can she reassure us that no penalty clause would be agreed to?