Brussels plans to slash £3bn rebate

BRUSSELS unveiled plans yesterday to slash Britain's £3bn rebate and double our contributions to the European Union.

The European Commission demanded that the rebate secured by Margaret Thatcher must be phased out within four years from 2008.

The money would go instead to pay much smaller refunds to Britain and a host of other EU countries, including Germany and the Netherlands.

Downing Street and the Treasury said the plan is totally unacceptable. One senior official predicted: 'This won't get through the door to the negotiating room, never mind make it on to the table.'

The Prime Minister's official spokesman stressed that Britain is ready to veto the plans.

British officials said the commission's own figures show the plans would double our contribution to the EU between 2007-2013.

If Britain keeps its existing rebate, Brussels estimates the UK's net contribution - which takes account of farm and regional subsidies that we receive from the EU - will be 0.25% of our national income, or around £3bn.

However, under the commission's plans to phase out our rebate by 2012 and replace it with a smaller refund, our net contribution would soar to 0.51% of national income - more than £6bn.

France's contribution, by contrast, would amount to just 0.33% of its national income.

A Treasury source said ministers concede that other countries may deserve rebates too - but insist our cashback deal is not negotiable.

But the woman behind the plans - EU Budget Commissioner Michaele Schreyer - brushed aside Britain's concerns.

'There will a phasing out on the one side and a phasing in on the other to take account of the political facts of life,' she said.

Even Britain's two fervently Europhile commissioners - Neil Kinnock and Chris Patten - baulked at backing the EC plans.

In recent days, they had succeeded in convincing Schreyer to drop plans to scrap the rebate in one go in 2008.

EU sources said the two men have been pressing for a longer transition phase of seven years, as well as a clearer link between the size of a country's contribution and its prosperity.

However, both Number 10 and the Treasury claim horse-trading by our commissioners in Brussels will have no impact on the Government's determination to defend the rebate.

Shadow Chancellor Oliver Letwin said last night: 'This is Brussels at its worst.'

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