An amendment seconded by former European Commissioner Lord Patten to force the Government to make a statement on staying under Brussels rule in a customs union with the EU was backed by 348 votes to 225.
The move has underlined concerns that the unelected upper chamber is packed with Remainers who oppose the democratic decision in the EU referendum and are determined to reverse the vote to Leave.
The vote came despite a number of passionate speeches by the Leave supporters in the Lords warning that peers are going to line themselves up against the British people.
Conservative former cabinet minister Lord Forsyth said the change being sought in relation to a customs union was “an attempt to create division and confusion” in the House of Commons in a bid to block Brexit.
He said it was seeking to make the UK’s withdrawal form the bloc “subject to some conditions about a customs union”.
He warned the amendments put forward in the unelected chamber were “putting the peers against the people”.
Lord Forsyth 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.”
Conservative Viscount Ridley damned the amendment as “an attempt to wreck this Bill and to prevent Brexit.”
He pointed out that remaining in an EU customs union will keep prices of food and clothes high because of the tariffs imposed by the EU on Africa and other producers outside Europe.
Former Chancellor Lord Lamont warned that Remainers were trying to “turn Britain into Turkey” which has no control over its own trade policy.
He said the disadvantages of being in a customs union are “threefold”: “Operating inappropriate tariffs, not having autonomy over domestic rules and goods, and three, not being able to conclude trade agreements.”
Labour former minister Lord Howarth of Newport said the amendment was “simply too vague for it to be appropriate for us to send it” to the Commons.
He said Vote Leave made it “absolutely clear” that leaving the EU meant leaving the customs union and single market.
Meanwhile, another former occupant of the Treasury Lord Lawson dismissed attempts by Remainers to rewrite history with claims that the customs union and single market had not been debated during the referendum.
He dismissed trade arguments in favour of a customs union with the EU, adding: “I urge the House to reject what is in essence a wrecking amendment.”
Crossbench peer Lord Kerr of Kinlochard, who proposed the amendment and described himself as an “enthusiastic Remainer”, opened report stage by moving a cross-party proposal which seeks to retain the option of a customs union with the EU.
He told peers that replacing trade with the EU with trade with countries further afield “will not be an easy task”.
Lord Kerr, a former Whitehall mandarin, added: “Looking further afield is well worth doing but it will be very hard not to see a fall in overall exports if our trade with the European Union is made more complicated – and it will be much more complicated if we don’t have a customs union.”
Meanwhile, Lord Patten used his speech to talk down Britain.
He mocked claims by the International Trade Secretary Liam Fox that a free trade deal with the EU would be “one of the easiest in human history”.
He suggested the current approach being taken by the Government to securing agreements was “absurd”.
Answering for the government, Brexit minister Lord Callanan said the Government did not support the customs union amendments, telling peers it would require the Government to report to Parliament on the steps taken towards delivering an objective it has “clearly ruled out”.
He 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.”
Vote Leave joint chairman Richard Tice said the peers vote was “disappointing but not surprising.”
He said: “The measure to compel the Prime Minister to keep the UK in a customs union with the EU is particularly outrageous, explicitly going against Government policy as approved in the Commons votes last year.”
April 18th, 2018: Express