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Last Updated: Tuesday, 3 April 2007, 18:31 GMT 19:31 UK
UK drops bid to boost EU rebate
Gordon Brown in Brussels
Mr Brown is said to regard the 2005 budget deal as "bad" for Britain
The UK has given up attempts to claw back some of the EU rebate sacrificed in 2005 by Tony Blair to achieve a long-term EU budget deal.

Chancellor Gordon Brown launched a bid in June to shave about 90m (133m euro) off the annual 1bn Mr Blair gave away.

But the UK has now given up its claim to this money in a deal on details of the way the budget will be implemented.

The Treasury has denied that the U-turn was a concession to France to prevent it blocking changes to UK VAT rules.

The EU budget deal negotiated by Mr Blair in December 2005 resulted in a cut of about 20% in the UK rebate - equivalent to about 10.5bn euros (7bn) between 2007 and 2013.

'No changes'

Separately, and some weeks ago, we agreed new rules across the EU to tackle missing trader VAT fraud - there is no linkage between these two dossiers
UK Treasury spokesman

The deal also included lump-sum refunds to four other countries which pay considerably more into the EU budget than they get out - Austria, Germany, the Netherlands and Sweden.

Mr Brown argued that the UK should get a rebate on its contributions to those refunds, as well as to the rest of the EU budget, causing EU officials to say that the UK was refusing to pay its "fair share".

Although Mr Brown was consulted during the budget negotiations he is reported to have regarded the outcome as a bad deal.

Agreement on the implementation of the budget was finally reached at a meeting of ambassadors in Brussels on Tuesday.

"There are no additional costs to the UK, and no changes to the position on our rebate beyond those agreed in 2005," a British Treasury spokesman said.

France was reported in February to have told Mr Brown that it would hold up UK plans to tackle a multi-billion-pound VAT fraud, unless he gave way on the rebate.

French fears

The scam, known as carousel fraud, involves the repeated import and export of high value goods, such as mobile phones, free of VAT from other EU countries.

France, which says the fraudsters could migrate across the Channel, dropped its opposition earlier this year, allowing the UK to announce last month to announce that the VAT change would take effect from 1 June.

EU diplomats repeated on Tuesday that the two issues had been linked, but this was rejected by the Treasury spokesman.

Changes to national sales taxes have to be unanimously approved by other EU member states because of the potential knock-on effects for them.

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