EU budget chief defends proposal to scrap British rebate

European Union Budget Commissioner Michaele Schreyer defended proposals Wednesday to scrap Britain's unique rebate on its EU cash contribution in the face of a fierce onslaught from London.

The German official said ending the rebate uniquely enjoyed by Britain was justified given the country's relative prosperity today and the need to divert EU money to newer member states in eastern Europe.

"We were bound to ask whether one could still justify having the exclusive sort of mechanism that was decided 20 years ago for Britain, during which time the country has enjoyed wonderful economic development," she told reporters.

"We understand that this is a very sensitive issue for the UK and for this reason we didn't propose to abolish the rebate altogether, but to introduce a new system, the 'generalised correction mechanism'," Schreyer said.

"But some members are so much poorer than the United Kingdom that we do have to tackle this problem.

"And we have the new story of enlargement. For this reason, the commission really was urged to make a new proposal for the future."

In future, under the plans unveiled by Schreyer, all countries that pay much more into EU coffers than they get back would benefit from the "generalised correction mechanism".

Thus, Britain's rebate on its EU contribution would go down from about 4.6 billion euros last year to 3.0 billion euros in future, although the country would still become the biggest net contributor overall.

Schreyer's plans were adopted by Brussels despite strong reservations from Britain's two commissioners, Neil Kinnock and Chris Patten, who argued they were politically unviable.

Kinnock and Patten succeeded in introducing a four-year transition period over 2008-2011 before the British rebate is redistributed, but still felt unable to back the overall proposals, officials said.

"There's a referendum on the (EU) constitution coming up in Britain and they felt that it just wasn't terribly helpful to have this out there at a time when euroscepticism is on the rise as never before," a commission source said.

"It wasn't the case that Britain's commissioners were simply defending their own government. They wanted political reality, something that Britain could actually negotiate and not just immediately veto," he said.

Indeed, British Europe Minister Denis MacShane immediately ruled out Schreyer's plans as unacceptable.

"The question of the rebate is not on the table as far as Britain is concerned," he told AFP in London. "It is pointless to reopen decisions already made."

But the German commissioner was adamant that the British rebate won by then prime minister Margaret Thatcher in 1984 -- who insisted on a refund because Britain received comparatively little from EU farm aid -- could not continue.

She said that without any change, the EU's poorest countries would have to pay more and more towards the British cheque while other net contributors such as Germany and the Netherlands would get a worse and worse deal.

Instead, the rebate would be redistributed among other net contributors that pay more than 0.35 percent of their gross national income into EU coffers, with a total cap for the rebate fund set at 7.5 billion euros.

Schreyer said she was not deaf to political realism. Scrapping Britain's rebate altogether, she said, "would not fly politically".