The emotive defence of the British rebate

President Chirac's claim that Britain's annual rebate from the European Union is indefensible has drawn predictable howls of outrage on this side of the Channel. Quick to fend off any claims that New Labour might be going soft on this supposedly vital national interest, Jack Straw rushed to declare that Britain would not hesitate to wield the veto on any discussion of the rebate.

Once the sound of battle has dimmed, however, it might be worth considering that more than 20 years have passed since Margaret Thatcher demanded her money back. The result was her famous victory, securing £3.5bn a year for Britain. But since then, both the EU and our economy have changed out of all recognition.

Britain in the early 1980s was one of the biggest contributors to the Brussels budget, but got little in return because so much EU spending took the form of farm subsidies. The rebate was intended to make up the difference. Now the British economy is one of Europe's most successful, and the EU has expanded to a community of 25. Many of the EU's newer members are relatively poor states, in need of budgetary assistance to modernise. This means that either the size of the cake has to grow, or savings have to be made. Scrapping, or at least trimming, the rebate would be one option. Besides, it is not just France that objects to the rebate. The new states find it hard to explain to their electorates why they should contribute annual sums to fund one of the club's richest members.

Clearly, no government is going to surrender on such an emotive issue, especially not with a general election looming. In any case, the rebate should only come up for discussion in the context of other issues. If Britain has to pay more, then it has a right to seek concessions in return. Perhaps France, for example, could be forced to accept further reform of the Common Agricultural Policy. The UK is also pressing its EU partners to speed up the pace of economic reform. But if we want progress on these issues, it may be necessary at least to consider sacrificing this sacred cow.

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