UK insists EU rebate is justified

Attention is on the EU's future

Downing Street has insisted Britain's European Union rebate is still justified after France called for it to be renegotiated.

French President Jacques Chirac said Germany and Poland also wanted a rethink of the rebate, which is now worth 4.6bn euros (£3.2bn).

The UK won the rebate on its contribution to EU funds in 1984 after a campaign by Margaret Thatcher.

Tony Blair's spokesman said: "The rebate is fully justified, full stop."

The spokesman said the UK could not be forced to give up the payment.

Asked whether the government's stance was simply a negotiating position, he replied: "Its not a macho position, it's a reasoned argument.

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"Because of the balance of funding we believe the rebate is fully justified."

Mr Chirac has used the rebate twice in less than a week as a weapon in his campaign for a yes vote in the French referendum on the draft European constitution.

He was joined on Thursday by Polish President Aleksander Kwasniewski and German Chancellor Gerhard Schroeder in the referendum campaign.

Freeze idea

Mr Chirac said all three countries agreed that the need for EU budget discipline and fairness to the EU's 10 new members meant the rebate should be reviewed.

"We concluded that to be able to incorporate all these demands [on the budget], we need to have a fairer financing of the European budget... which would incontestably demand looking again at the British rebate," he said.

Luxembourg, which currently holds the EU presidency, says it will use this weekend's foreign ministers' meeting to propose a freeze in the rebate and a slow phase out.

British officials have said the UK pays more than twice as much as France does even after the rebate, given France's big receipts from the Common Agricultural Policy.

Conservative shadow foreign secretary Liam Fox urged the government to stand firm.

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"There is an imbalance in the EU budget," he said. "Britain gets relatively little back - we've got a smaller farming sector, we have got fewer poor regions.

"As long as that imbalance exists, the rebate must remain safe."

The impact of the French referendum, which is held on 29 June, has again been felt on the British political scene.

Liberal Democrat foreign affairs spokesman Sir Menzies Campbell said the UK should not have a referendum on the EU constitution if the French vote no to it.

He said a no vote would mean "going back to the drawing board".

Commons leader Geoff Hoon told MPs ministers intended to publish the Bill next week outlining plans for a UK referendum.

But Europe Minister Douglas Alexander refused to name a date for the referendum or speculate on what would happen if the French voted no.

He said there would be a British referendum "as long as there is a treaty to vote on" and said a French no vote would have "serious consequences".

The Conservatives are demanding a referendum on 13 October this year, which they say is the earliest practical opportunity.

The party argues that by giving their view voters can give the government far greater authority in its negotiations in Brussels.