Britain told to give up EU rebate

THE GOVERNMENT was under strong pressure last night to back down over Britain's European budget rebate.

European Union foreign ministers meeting in Brussels made it clear that, whatever Tony Blair says, the unique "discount" - whereby Britain gets more than pounds 2bn a year off its EU bills - is up for renegotiation.

The message was delivered to Robin Cook, the Foreign Secretary, at the start of discussions on "Agenda 2000" - the European Commission's plans to reform the European budget.

In the face of calls from Holland and Italy, in particular, to renegotiate the deal won by Margaret Thatcher in 1985, Mr Cook remained defiant.

"It is not going to change," he insisted in Brussels. "Even after the rebate, Britain's net contribution remains higher per head than other countries which are in a better position to pay. It is justified, it is right, we are going to keep it."

That view will be vigorously challenged, not least by Germany, which insists that if Britain still gets a preferential deal, it too will be demanding a rebate.

The rebate is a tiny part of a proposal which attempts to tackle EU budget discipline, regional and social spending priorities, and the farm budget, the biggest drain of all on the EU's pounds 65bn annual budget.

But the British rebate problem is destined to loom charge as the talks proceed.

Austrian foreign minister Wolfgang Schussel, chairing last night's talks, clearly meant the UK when he told the press: "Every delegation must be expected to go beyond its existing positions. That sort of flexibility is extremely important."

The Government's case for keeping the rebate is that, while Britain's economy may be stronger than when the rebate was agreed, Britain is still a relatively poor EU member state.

That is not an argument that the European Commission can afford to accept as the EU prepares to admit a handful of much poorer states from eastern Europe.

The Government's refusal to budge on the rebate will increase the determination of Germany and France to twist Mr Blair's arm over more EU integration of national taxation policies. The Prime Minister may have no alternative but to threaten a double veto - on the rebate and tax.