TONY BLAIR is to face down charges of betrayal by claiming that a plan for a cut of up to £7 billion in the British rebate over seven years will bring Britain’s EU spending down to that of France and help the development of Eastern Europe.

The Prime Minister has decided to “take one big hit” by ruling that all of Britain’s additional contribution to the EU over the next seven years should come from forgoing rebate money to which it would have been entitled from the ten new members from the East.

Plans to divide Britain’s so called “fairer” contribution to the EU between a reduction in the rebate and extra one-off payments into the budget have been dropped because Mr Blair thinks he will have more public support for a move that is seen to benefit the newer entrants.

After talks last night between Mr Blair and Jack Straw, the Foreign Secretary will announce the plans at a press conference in London today. Under the plan, Britain would cut the total rebate on its contributions by between €6 billion (£4 billion) and €10.5 billion between 2007 and 2013.

That could mean a cut of £1 billion a year in the rebate as it stands. But the Government will also publish figures today showing how, without the cut to help Eastern Europe, Britain’s rebate would almost double over the next financial period because of the failure to secure big cuts in farm spending as part of the deal. The rebate stands at €5 billion and would rise to €8 billion.

Michael Howard, the Tory leader, accused Mr Blair yesterday of “caving in”. “What he said less than six months ago to the House of Commons was that the rebate would not be negotiated away, period. Nothing has changed in the past six months, he has just caved in, he’s not getting anything in return for the concessions he is now making.” However, Mr Blair has decided that he can justify his change of stance by stressing that it is part of a much wider move to reduce the overall budget of the EU by more than £20 billion, including 10 per cent cuts in aid for the emerging countries.

Ministers are saying that when Margaret Thatcher won the rebate more than 20 years ago the last thing she would have expected would have been to use it to penalise the newer members from Eastern Europe, whose membership at that time was no more than a distant prospect. They add that British companies will gain from the expansion in those countries that EU aid will help to spur.

Mr Straw will lay out the plan today and it will be discussed by foreign ministers on Wednesday before the full end-of-term summit in Brussels on December 15-16. Ministers are quietley optimistic of the prospects of a deal, despite the opposition to cuts in aid encounted by Mr Blair on his trip to Eastern Europe last week.

Under the revised deal Britain is aiming for rough parity between countries of similar size in their budget contributions. Britain’s and France’s would be nearly the same at 0.4 per cent of gross national income. Britain’s has usually been higher than France’s, despite the rebate.

But Mr Blair will continue to be attacked for making the concession of not applying the rebate to economic development funds for Eastern Europe because he has failed to win any concessions from the French. That, more than giving up the Eastern Europe rebate, is likely to be the Conservative line of attack this week.

Peter Mandelson, the European Trade Commissioner, accused Mr Brown of going “over the top” in his demands for reform of European farm subsidies.

He said that Mr Brown was “missing the point” in pressing for cuts to the Common Agricultural Policy in order to secure a world trade deal that would open up international markets to producers from the world’s poorest countries.

Mr Mandelson, who is representing the EU in the World Trade Organisation talks, said a crucial summit later this month in Hong Kong would not deliver the sort of deal Britain was looking for, although he hoped there would be “some progress”.

After a meeting yesterday in London of finance ministers of the G7 group of leading industrialised nations, Mr Brown urged the EU and the United States to go further in cutting farm subsidies for the sake of an agreement.

Mr Mandelson told the Jonathan Dimbleby programme on ITV1: “I think he’s going somewhat over the top in asking for that.”

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