UK-EU Customs Union

Baroness Finn Excerpts

Thursday 29th January 2026 Lords Chamber

[Baroness Finn (Con)]

My Lords, I begin by congratulating the noble Baroness, Lady Gill, and the noble Lords, Lord Docherty of Milngavie, Lord Pitt-Watson and Lord Doyle, on their maiden speeches today. Their thoughtful, witty and heartfelt contributions demonstrate that they will be a huge asset to your Lordships’ House, and we look forward to hearing more from them in the years to come. We will miss the noble Lord, Lord Offord of Garvel, and we are sorry to see him leave in this way.

Many of the arguments in today’s debate will be very familiar to the House. I do not intend to relitigate the referendum or to reopen the entire Brexit debate. However, I will address directly the core proposition of the Motion before us today: the case for a United Kingdom and European Union customs union and the related question of closer connection to the EU single market.

It is important at the outset to be clear about terms, because this debate often proceeds as though the single market and the customs union were flexible or à la carte arrangements. They are not. Participation in the EU single market entails acceptance of the four freedoms, including the free movement of people, which is set out explicitly in the EU treaties and has been repeatedly reaffirmed by the European Court of Justice. There is no precedent for participation in a single market without freedom of movement, and the European Commission has consistently ruled out such an arrangement. As my noble friend Lord Tugendhat correctly pointed out, we have to be realistic.

Equally, a customs union with the European Union requires the participating state to align its external tariffs with those of the EU and, crucially, to accept trade policy as set by the EU. This means allowing Brussels to negotiate and conclude trade agreements on our behalf. This is not compatible with an independent trade policy or consistent with the Labour Party’s manifesto commitments, which ruled out rejoining the customs union or the single market. The proposition before us today therefore sits uneasily not only with the outcome of the referendum but with the stated positions of parties across this House—and, ultimately, is against what the British people have voted for repeatedly over the past decade. My noble friend Lord Jackson of Peterborough rightly cautions against such an approach.

The EU customs union is open only to EU member states. Norway and Iceland, frequently cited in these debates, are not in a customs union with the EU. They participate in aspects of the single market through the European Economic Area but retain their own external trade policy and sit outside the customs union. The only large non-member state in a customs union with the European Union is Turkey, which entered into a customs union with the EU in 1995. It did so in the expectation that this would be a stepping stone to full EU membership; that expectation has not been fulfilled.

Under the terms of the customs union, Turkey is required to align its external tariffs with those of the EU and to grant market access to countries with which the EU concludes free trade agreements. However, those third countries are under no reciprocal obligation to grant equivalent access to Turkish exports; it is an asymmetrical trading relationship, as the noble Lord, Lord Frost, and my noble friend Lord Lilley have made clear. The EU has concluded trade agreements with countries such as South Korea, Mexico and South Africa; Turkey has been obliged to open its markets to those countries, while in some cases Turkish exporters have faced barriers in return. Under that arrangement, Turkey has, for instance, been forced into a non-reciprocal trading relationship with South Korea, which does not provide the country with open access to its own market. Turkey still experiences queues at the border. A customs union does not remove regulatory checks, rules of origin procedures or non-tariff barriers. In short, it does not deliver frictionless trade. Most importantly, Turkey has no seat at the table when EU trade policy is decided; it is bound by decisions that are taken elsewhere.

As a member of the EU, the UK had a vote in the Council, representation in the Commission and elected members of the European Parliament. Under a customs union without membership, we would have none of these things. We would be obliged to follow a common external tariff and trade policy over which we exercised no formal control. It is therefore difficult to see how such an arrangement could be described as a stable or acceptable long-term settlement. It would mean ending our independent trade policy while accepting a democratic deficit greater than one that existed before we left the European Union. It would mean leaving our existing trade agreements with India and the Pacific trade pact. As the noble Lord, Lord Frost, and my noble friends Lord Lilley and Lord Moynihan of Chelsea have pointed out, this would not be beneficial.

Businesses across the country have spent several years adapting to the post-exit trading framework. They have invested heavily in new systems, technology and infrastructure to comply with the regime put in place by Parliament. Dynamic alignment, as currently envisaged by the Government, risks constraining the areas where the United Kingdom has already chosen to divert from EU rules to address domestic priorities. A clear example is bovine tuberculosis, which costs farmers around £150 million a year. The UK is trialling vaccination as a practical solution, yet EU law prohibits the use of bovine TB vaccines in cattle. Alignment risks preventing the UK from pursuing an effective domestic response. The noble Lord, Lord Dodds, has highlighted the problems of dynamic alignment in Northern Ireland.

As my noble friend Lord Elliott has rightly observed, membership of a customs union would also prevent the United Kingdom from pursuing an independent approach to technology and AI policy. In short, dynamic alignment risks closing off innovation, weakening resilience and undermining British agriculture. The Prime Minister has said that he is not prepared to rip up the benefits of Brexit. Does the Minister agree that the risks that I have outlined threaten exactly that?

Businesses do not want perpetual renegotiation of our relationship with the EU but clarity, consistency and confidence. Threatening to upend the regulatory and trading environment yet again, simply to pursue closer alignment for its own sake, undermines all three. Will the Government commit to publishing, as the noble Lord, Lord Verdirame, has suggested, a policy paper on the objectives of their negotiations?

There are only two coherent options: full membership of the European Union or an independent United Kingdom outside its customs union. A stand-alone customs union is not a stable resting place; it would bind us to obligations without influence and leave us with less control than we had before we left. The British people were asked what they wanted, and they chose an independent United Kingdom. This is a position that we on these Benches recognise and respect.

In their pursuit of a closer relationship with the European Union, the Government are potentially in danger of undermining the very freedoms this country regained by leaving the bloc. We must be clear that surrendering our ability to innovate, to respond flexibly to domestic challenges and to support our own economy would amount to abandoning the principles that underpinned the decision to leave in the first place. Seeking to improve the UK’s trade and investment relationship with the EU and to remove genuinely unnecessary barriers to trade is a legitimate and worthwhile objective, but it can succeed only if the Prime Minister is firm and unambiguous about his red lines. Without that firmness, pragmatism slides into concessions that the British people have consistently voted against. It is vital that the Government negotiate in a way that consistently safeguards the interests of the British people, and I hope the Minister can assuage these concerns in her response.