Critics of Britain's rebate from EU are deluded, says Straw

The rift over the future of the British budget rebate has escalated into a full, cross-Channel, confrontation as Jack Straw, the Foreign Secretary, attacked critics of Britain's ¤4.6bn (£3bn) annual cheque from Brussels as "deluded".

In the strongest language yet from the British government, Mr Straw launched an assault on the entire spending plans for the EU for 2007-13, describing them as "wasteful and unfair", and saying that nations like France would gain "perversely" from farm subsidies.

Although not mentioned by name, the comments were seen as a direct riposte to the French president, Jacques Chirac, who has called for the end of the rebate as a "gesture of solidarity", but refused to countenance a reduction in EU farm spending.

After three-hours of talks produced stalemate, Catherine Colonna, France's European affairs minister, hit back saying that the British position on the rebate "defies the logic of the EU and undermines solidarity".

Because of negotiations to set a new EU budget, the rebate is under the most sustained pressure since its creation 20 years ago. Nevertheless the tough rhetoric from Mr Straw suggested that a deal on EU funding is further away than ever, and sets the scene for a fierce confrontation at a summit on Thursday.

Paris insists it will not re-open an agreement, struck in 2002, laying out a ceiling for farm spending plans up to 2013. But the UK has now made it clear that it will negotiate on the rebate ­ which compensates Britain for its low receipts from the CAP ­ only if there is reform of the EU farm subsidy.

"The rebate is not the issue," said Mr Straw as he arrived in Luxembourg, "and people are deluded if they think the rebate is the issue."

Mr Straw added: "The rebate is a symptom of a fundamentally-distorted budget system which continues to give the UK the lowest per capita receipts of any country because our agricultural sector is efficient and relatively small. It is the better-off states of the EU that perversely stand to gain the most from agricultural subsidies.

"Over 40 per cent of the proposed spending will go on CAP to sustain high prices for continental farmers and to keep out cheaper exports [from Africa]."

The reply from France indicated that the tension remains. Mde Colonna said: "The British have a point of view which is not that of the great majority of their partners. It is one thing to express a point of view; it is a completely different thing to justify it and raise good arguments."

Miguel Moratinos, the Spanish foreign minister, said: "Everyone is unanimous except Britain that the [British] cheque must be adapted. The taboo has been broken."

At Thursday's summit heads of government are due to agree on EU financing for the period 2007-13. The plan on the table, worth ¤871bn over seven years, represents 1.06 per cent of gross national income, according to the Luxembourg presidency of the EU ­ or 1.09 per cent, according to the government. Britain wants a spending freeze.

In the wake of the "no" votes in the French and Dutch referendums, Aleksander Kwasniewski, the Polish President, told Germany's Tagesspiegel newspaper: "We're all obliged to help rescue Europe."

But that cut little ice with the government and one British source said: "We didn't anticipate coming here for an agreement."

France points out that, since 1984, then the proportion of EU budget spent on agriculture has dropped from about 70 per cent to about 40 per cent.

Moreover, other nations, such as the Netherlands, now contribute more per capita than the UK which has become one of the EU's richest nations.

Meanwhile, the 10 nations that joined the bloc last May must ­ like all EU countries ­ help fund the rebate.