TONY BLAIR was accused of surrendering the British rebate yesterday after Britain offered to increase payments to Brussels by €8 billion (£5.6 billion) in an attempt to clinch a deal on the EU’s seven-year budget.

However, the Government sought to limit the increase in Britain’s contribution — equivalent to £800 million a year — by insisting on cuts in the EU’s seven-year budget, including a sharp reduction in development aid to Eastern Europe.

The proposals were immediately condemned as unacceptable by France, Poland and the European Commission, which wants to build up the EU’s role.

Under the proposals announced yesterday, Britain will pay €58 billion more into the EU than it gets out between 2007 to 2013, up from €50 billion under current plans. The Government made the concession despite failing to get any agreement from France on cutting farm subsidies, proposing instead only a non-binding review of EU spending in 2008.

Jack Straw, the Foreign Secretary, declared that Britain had to pay its “fair share” of the EU budget, which was increasing because of the admission of poor Eastern European countries last year.

He said: “The UK Government recognises its responsibility to pay a fair share of enlargement. Enlargement has been a strategic objective of successive British governments.”

Under the plans, Britain would sacrifice its rebate on regional development aid spent in Eastern Europe but keep the majority of the rebate on the EU’s farm subsidy budget and development aid in Western Europe. Mr Straw said: “There can be no fundamental change in the rebate unless there is a fundamental change in agricultural spending.”

Having failed to secure agreement over France on this, the Government proposed a review of all EU spending in 2008.

The Conservatives accused the Government of surrendering the rebate because it had accepted cuts in it without securing agreement from France and other EU countries to curb the Common Agricultural Policy, which accounts for nearly half the EU budget.

The rebate was secured by Margaret Thatcher in 1984 to compensate Britain for getting so little out of the CAP. Graham Brady, the Conservative Europe spokesman, said: “Mr Blair has spent the last few days rushing around Eastern Europe trying to find a friend. Now, at the last minute, he has come up with these ill-considered and damaging proposals to surrender part of Britain’s rebate whilst getting nothing in return.

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The Government sought to divert attention from Britain’s rebate to the actual amount Britain pays in, declaring that for the first time since it joined the EU in 1973 Britain will be paying the same as France and Italy rather than more. British officials said that Britain had to increase its payments; otherwise, it would have become the second smallest net contributor after Cyprus. Under these proposals, it will become the fifth biggest.

Mr Straw said: “We in the UK are prepared to pay our fair share, but no more than our fair share.” He said that it was a “tough budget”, which would put an end to the relentless growth in the Brussels spending, reducing it to the lowest level as a share of the economy since 1985. He proposed a cut in the EU budget for 2007-13 of €24.7 billion, from €871 billion to €846 billion.

The majority of the cuts will come from development aid to Eastern Europe, which will be cut from €164 billion euros to €150 billion. The proposals were immediately dismissed by Kazimierz Marcinkiewicz, the Polish Prime Minister, who said: “It is unacceptable. Instead of reform, there is a decrease in the budget for new member states, a decrease for the development of new states, especially Poland.”

Philippe Douste-Blazy, the French Foreign Minister, said the proposed budget “does not abide by the principle of solidarity”, while Portugal also expressed concern. Britain won guarded support, however, from the Netherlands and the Czech Republic.

Britain also proposed cuts across other EU programmes, including rural development and culture, as well as slashing €1 billion from the Commission’s own administration budget. Overall, the EU budget would be cut from 1.06 per cent of GDP to 1.03 per cent, dropping below 1 per cent of GDP by 2013. “This would be a major achievement,” Mr Straw said.

The proposals outraged those who want to build up the power of Brussels. José Manuel Barroso, the President of the European Commission, said: “The British proposal is simply unrealistic.”

THE PROPOSAL