Peers voted by 247 to 218 to require the government to negotiate a Brexit deal that keeps the UK in the European Economic Area (EEA), in a major reversal for Downing Street.
Almost half Labour peers ignored party orders and voted for the amendment, adding to pressure on Jeremy Corbyn over his rejection of continued single market membership.
The Prime Minister now faces a significant challenge to strip the Withdrawal Bill of amendments when it returns to the Commons, where any defeat at the hands of emboldened Tory and Labour rebels could throw the Brexit process into turmoil.
Pro-EU MPs celebrated the vote, with the Conservative Antoinette Sandbach tweeting it “ensures that options are kept open and not closed down”.
In total, 83 Labour peers - 44 per cent of the total number - defied the party whip to abstain. In a Twitter post, Labour MP Chris Lesley called on party members to “to let [Shadow Brexit Secretary] Keir Starmer and Jeremy Corbyn know that we cannot afford for Labour frontbench to abstain again when it comes to Commons”.
Peers inflicted two other defeats on the government’s flagship Brexit legislation, taking to 13 the number of key issues the Commons will have to decide whether to reverse.
The Lords voted for cross-party amendments to allow Britain’s continued participation in EU agencies, and to remove the Brexit date of March 29 2019 from the bill.
The defeats suggest there could be a lengthy and time-consuming period of ‘ping pong’ between the two Houses of Parliament as the government seeks to strip unwanted amendments, potentially delaying the rest of its crowded Brexit legislative timetable.
Labour peer Lord Foulkes said the government’s failure to agree key aspects of Brexit policy and the pileup of crucial legislation meant he was ready to wager £10 that the UK will not leave the EU on the designated exit day next year.
Lord Foulkes said: “I’m certain that we are not going to be leaving the EU.” Brexit minister Lord Callanan turned down the offer, saying Lords’ rules likely prohibited “gambling across the floor”.