Blair ties further cuts in EU rebate to farming reforms

Europe's 25 countries appeared to be edging toward a deal on the budget after Tony Blair confirmed that the British presidency would be tabling fresh proposals next week before the Brussels summit.

Mr Blair will have to surrender more of the £3.8bn British rebate to secure a deal, but risked reigniting the confrontation with France by insisting that a deal would be impossible without a fundamental review that leaves open the possibility of cuts to the Common Agricultural Policy (CAP) before 2013.

However, in Paris, it was noticed that Mr Blair went out of his way to avoid presenting the budget crisis as a clash between the British presidency and France.

A senior French official said the French president, Jaques Chirac, is willing to accept Mr Blair's demand for a mid-term review of the CAP, providing it is part of a comprehensive review of EU spending and not implemented until after 2013.

"There will have to be something about the rebate in the new proposals," said the French official. "We would like a deal. We put €12bn (£8bn) on the table. We don't want that money to be used for the British rebate. We are not against a mid-term review of the CAP in principle. If the clause said we are going to change the CAP before 2013 we would oppose that, but we would not object to a having a review providing it included all forms of spending in the EU."

The sticking point will be Mr Blair's insistence that changes to the CAP could be brought in before 2013. But yesterday he said that he would settle for a promise to review with the prospect of change left open until around 2008. "The perspective we are trying to agree now is between 2007 and 2013," said Mr Blair. "We have suggested that a commission review [be] published in 2008. That would allow changes shortly after that. That is roughly what I would like to see. I understand at the present time France and another 11 or 12 countries are saying they are not going to change. My insistence is that we have the review on that timescale and that we leave it open to ourselves at that point to change if we do so."

Mr Blair said three factors would increase the leverage for change to the CAP in 2008: the World Trade Organisation talks which are linked to food subsidies will be over; the budget would be up against the ceiling for CAP expenditure; and the British rebate will have grown. "What I do insist upon is that those of us who want to argue that case do it on the basis of a review that allows us to change the second half of that perspective," he said.

Mr Blair announced the plan to table fresh proposals, after a round of talks with more than a dozen EU leaders in 24 hours. Jose Manuel Barroso, the president of the EU commission who accused Mr Blair of acting like the Sheriff of Nottingham, robbing the poor to give to the rich, changed his tone after one hour of talks with the Prime Minister, saying a deal was possible. "Everybody has to make a move," he said. "I hope the British Government also will make a move."

Bertie Ahern, the Irish Prime Minister, said the Irish had problems with rural spending and the size of the rebate, but added: "The overall picture should be that we should try to complete this next week. It will not be good for Europe if we don't."

The Tories accused Mr Blair of preparing a 'ludicrous climbdown'. "It is now clear that Mr Blair is prepared to give away Britain's rebate without any guarantee of CAP reform," said Graham Brady, the shadow minister for Europe.