EU states join forces to halt Britain's pounds 2bn budget rebate

ALL 14 of the other EU member-states are fighting to end or curb Britain's budget rebate, it emerged on the eve of today's meeting of finance ministers, which will debate reforms to the way Brussels is funded.

The opposition to the rebate, worth pounds 2bn a year, was made clear at a recent meeting of permanent representatives to the EU when the British ambassador, Sir Stephen Wall, was outnumbered. A EU diplomat said: "On this issue it is 14 to 1".

But Britain's isolation has failed to bring any hint of concession from London, raising the prospect of deadlock over ambitious plans to reform European finances.

At today's meeting of finance ministers in Brussels the rebate is likely to be raised as part of a more general discussions. At earlier meetings British ministers dismissed reports of pressure, arguing that other member- states do not really expect the UK to relent.

The Government concedes the rebate will be hotly debated, although Gordon Brown, the Chancellor, is showing no sign of a willingness to re-negotiate, aware that no change could be agreed without British agreement. The Government is rejecting one compromise idea, which would prevent the rebate applying to areas of spending connected with proposed EU enlargement.

Ministers argue that even after the EU enlarges to the East, Britain will end up as a bigger net contributor than several richer countries. The Government also says reform of the Common Agricultural Policy, which will ultimately benefit the UK, will increase costs in the short term.

A source argued: "There is no shift in the UK position ... It is non-negotiable, because it is justified and will remain justified. If others want to discuss it - and clearly they are going to - we will defend it."

The German presidency of the EU has made the budget the centrepiece of its agenda for coming months and hopes next month to conclude a deal that will cut its contributions. The new government is determined to end the era in which it bankrolled the Brussels budget with a net contribution of pounds 8bn a year. The Netherlands, Sweden and Austria are also pressing for cuts in their bills.

Commission officials say the outline of a settlement made up of several elements is becoming clear. A central feature is likely to be plans to freeze EU spending in real terms for the years 2000-2006.

The rebate, won by Margaret Thatcher in 1984, refunds 66 per cent of the difference between what the UK pays in VAT receipts and what it gets back from the CAP and structural funds.