Mr Blair said that Britain had been making a gesture for years by paying a lot more money into the EU coffers than France. He said that the only way he would consider backing down was if France accepted the need for reductions in spending on agriculture.

M Chirac said yesterday that the agricultural policy was not on the agenda.

Mr Blair’s tough line came after a meeting yesterday with Gordon Brown, the Chancellor, and Douglas Alexander, the Europe Minister, which appeared to have hardened the Government’s resolve before Sunday’s conclave of foreign ministers in Luxembourg, when the latest attempt to reach a deal on the European Union budget will be made.

The Times understands that the meeting decided that the so-called Luxembourg compromise, under which the British rebate would remain but be frozen at current levels, was unacceptable. At the same time Mr Blair appeared to have secured an ally, Denmark, in his efforts to get the treaty on the constitution shelved after the “no” votes in France and the Netherlands. After talks at No 10, Anders Fogh Rasmussen, the Danish Prime Minister, whose country has scheduled a September 27 referendum, said that he hoped a ecision would be made by next week’s summit on whether the ratification process should be abandoned.

In a briefing note to European leaders, seen by The Times, the British Government has set out a presidency programme seemingly guaranteed to meet French opposition. It promises to push the services directive, aimed at opening up the single market in services, which is anathema to the French.

It wants to reduce barriers to financial institutions, making it easier for the City of London to operate across Europe, to promote free trade in the world trade talks and promote EU enlargement. Britain is determined to push ahead membership talks with Turkey, due to start on October 3. Not one programme on the British agenda promotes France’s vision of a “social Europe”.

M Chirac said after a meeting with Jean-Claude Juncker, the Prime Minister of Luxembourg:: “The time has come for our British friends to understand that they must now make a gesture of solidarity.”

Mr Blair delivered his rebuff after the talks with Mr Rasmussen. “Britain has been making a gesture, because over the past ten years, even with the British rebate, we have been making a contribution into Europe 2½ times that of France.

“Without the rebate, it would have been 15 times as much as France. That is our gesture . . . The reason why the rebate exists is because otherwise there would be this quite unfair proportion of British contribution. The reason for the unfairness is because the spending of Europe is so geared to the Common Agricultural Policy.

“If we want a debate on future financing, one part of that has got to be what Europe needs to spend its money on to prepare Europe for the 21st century, which is not the same as Europe 30 or 40 years ago.”

M Chirac excluded any challenge to a Franco-German deal on the agricultural policy, from which France greatly benefits. “We cannot accept any reduction whatsoever of the direct aids to our farmers,” he said.

The CAP is to remain as it is until 2012 under the deal, which was struck in 2002, much to the anger of Mr Blair.

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