EU to get its money back by slashing British rebate

Britain's financial contribution to the EU would double under a controversial plan to slash the value of the UK's €3bn (£2bn) annual budget rebate, which was won by Margaret Thatcher in 1984.

Britain's financial contribution to the EU would double under a controversial plan to slash the value of the UK's €3bn (£2bn) annual budget rebate, which was won by Margaret Thatcher in 1984.

Under the proposal, the UK would become the largest net contributor to the EU, as it was before Mrs Thatcher secured the rebate at a summit in Fontainebleau at which she demanded: "I want my money back." But last night the plan, produced by the EU Budget Commissioner, Michaele Schreyer, was already provoking a backlash as the two British members of the Commission, Neil Kinnock and Chris Patten, made clear their opposition and demanded changes.

Mr Patten protested at a meeting on Tuesday and one Commission source said: "It is such a self-evidently unfair proposal that it is politically naive. Doubling the UK's contribution is not a sensible option."

Details of the plan, leaked to the French newspaper Le Monde, projected the UK's contribution increasing from its current level of 0.25 per cent of gross national income, to 0.51 per cent from 2007 to 2013. That would put the UK ahead of Germany and the Netherlands, which would both be paying in 0.48 per cent.

The precise amount of extra cash at stake is difficult to estimate because the document, due to be agreed next week, deals only in percentage contributions to a spending target which has yet to be fixed. But the plan would mean a big hike in the UK's average annual net payment to the EU, which was €3.8bn during the years 1995 to 2002, according to the Treasury.

The budget rebate is designed to compensate the UK for the fact that it pays much more into EU coffers than it gets back because of its low income from the Common Agricultural Policy. The mechanism is set until the end of next year, and Tony Blair has a veto over any new scheme for the next financing period of 2007-13.

But there is pressure on him to make some concessions because since 1984, other countries, including the Netherlands, Austria and Sweden, have become big net contributors. Moreover, the 10 new countries that joined the EU in May have found themselves contributing to the rebate. That is an embarrassment for the UK, which was a big supporter of EU enlargement.

Among the 25 EU nations there is broad support for the a general correction mechanism, which would give some relief to all nations that pay more into the EU than they receive. But some diplomats believe that Ms Schreyer's document is politically counter-productive. Tabling such a drastic increase in British contributions makes it easy for the UK to reject change, some officials argue.

Several commissioners are pressing for changes to the plan before it is published next week.

In addition to hitting the UK, Ms Schreyer's proposal would make one other net contributor - Austria - worse off, thus giving Mr Blair an ally. Even a German government document cited by one newspaper described the plan as unacceptable to the UK and called for concessions to make the scheme more palatable to London.

A UK official said: "We do not consider that the rebate is on the table. It is not negotiable."