Britain's EU rebate may be frozen under farm reforms

Britain's £3bn EU rebate could be frozen as part of a deal on the reform of the Common Agricultural Policy at next week's summit.

Tony Blair hinted at the deal yesterday when he defended the rebate in the Commons. The Prime Minister said the rebate would "remain and we will not negotiate it away, period".

However, Mr Blair did not use the threat of the veto, which had been mentioned 24 hours earlier by Gordon Brown. The current holders of the EU presidency have proposed freezing the rebate and reducing it, which would cause a furious row in Britain.

Mr Blair knows he is heading for an EU ambush, and could decide to tough it out. However, there were clear signals yesterday he may be ready to negotiate.

Securing reform of the CAP against opposition by France would be a prize for Mr Blair and would fit in with his agenda for the G8 to reduce trade barriers against the African states.

MEPs increased the pressure on the Government to compromise yesterday when they backed calls for a deal on the EU budget to help put Europe back on track after the French and Dutch referendums. Meeting in Strasbourg, MEPs rejected by 497 votes to 173 an amendment that would have ringfenced the UK's budget rebate.

Britain's former minister for Europe, Denis MacShane, said last night the EU rebate could be frozen at its present levels in spite of the apparent denials by Mr Blair, the Chancellor and Downing Street, in return for reform of the CAP.

He said circumstances had changed since the rebate was secured by Lady Thatcher at Fontainebleau in 1984. Britain was no longer a poor country in Europe. "If you get agricultural reform there may well be a case for saying freeze it at its present level."