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Last Updated: Wednesday, 8 June, 2005, 21:17 GMT 22:17 UK
Blair says rebate 'will remain'
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The UK's rebate continues to be a controversial EU issue
The UK's EU budget rebate remains justified and "will not be negotiated away", Tony Blair has told MPs

He spoke amid claims other members want to freeze or axe the rebate, won by Margaret Thatcher in 1984, when leaders meet at a summit next week.

Speaking at Prime Minister's Questions, he said: "The UK rebate will remain and we will not negotiate it away. Period."

Reports suggest summit host Luxembourg wants a compromise cutting EU farm subsidies and freezing the UK rebate.

'Jelly to a wall'

Shadow chancellor George Osborne said it was not good enough for Mr Blair to say he would not negotiate away the rebate.

"What he needs to say is that he will not diminish its value in any way and that there will be no concessions and no fudging," he added.

"Trying to extract the truth from this prime minister is like trying to nail jelly to a wall. He must be completely clear about what he means."

The prime minister's official spokesman had earlier told journalists the government's position on the 3bn-a-year rebate remained unchanged.

Veto

"We have consistently said that we believe that the rebate is wholly justified because of the balance of payments within Europe," the spokesman said.

"That remains our position - we will not be afraid to argue our case and we will do so."

Quizzed about whether the rebate was non-negotiable, the spokesman said: "We stick by that. It is wholly justified and we will continue to argue that case."

Asked if the government might accepted a plan to freeze the level of the rebate, he said: "We have not seen any proposal that is acceptable to us."

The spokesman said the government still had a veto on any plans along those lines which it considered unacceptable.

Fund raising

Luxembourg's prime minister Jean-Claude Juncker, who is hosting the 16-17 June EU summit, emerged from talks with Chancellor Gordon Brown and other EU finance ministers on Tuesday saying it would be "advisable to reach agreement next week".

The UK had relied on the support of Germany, France, Austria, Sweden and the Netherlands to peg the EU's annual budget at no more than 1% of member states' incomes.

The Commission wants to have 1.24% of combined gross domestic product to meet the higher costs of an enlarged EU.

An increase from the current .98% to 1.24% of GDPs would raise the EU budget from 70bn to around 87bn.

But now France and Germany look set to make an attempt to break the stalemate by leading the others in accepting a compromise spending deal of 1.06% - but the UK says that is still unacceptable.

Big contributor

Mr Brown says keeping to 1% would still allow a margin for annual increases in the EU budget that exceeded the growth rates of most national budgets and that would allow enough cash to pick up additional enlargement costs.

But other members say that if Mr Brown and Mr Blair want to make savings, they could give up the rebate.

The chancellor has indicated that the UK would use its EU veto to halt any attempt to change or abolish its rebate.

Without the rebate, the UK would pay the EU more than 5bn a year. Even with the rebate, the UK is the second-largest contributor to the EU.




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