Brown demands cut in French farm subsidy

Gordon Brown yesterday weighed into the EU budget row, urging France to make concessions on agricultural subsidies in response to Britain's offer to cut its rebate.

Tomorrow Tony Blair will formally present his proposal to secure a deal on the EU budget before European governments. It is expected to propose that Britain cut around €1.5bn (£1bn) a year from its rebate. The Prime Minister has abandoned hopes of getting a guaranteed cut in farm subsidies before 2013. But the Chancellor yesterday sought to depict France as isolated, and urged the French government to agree to lower subsidies. Speaking after a meeting of G7 finance ministers in London, Mr Brown said both Europe and the US would be prepared to lower their tariffs on agricultural goods at key trade talks about to start in Hong Kong. Brazil and India had signalled they would be prepared to compromise over tariffs on industrial goods at the World Trade Organisation meeting.

The Chancellor said yesterday that he regarded theirs as "very important statements", adding: "This is a matter now for the French to discuss with the European negotiators, but they did sign up to a statement which ... calls for significant progress in market access and in agriculture."

But ministers were downplaying expectations of a deal on the EU budget yesterday, and warned that Britain may not be able to clinch agreement, despite offering to give up as much as 15 per cent of its annual rebate. Douglas Alexander, the Europe minister, told Radio 4's Today programme that "it would would be greatly to our disadvantage" if Britain were unable to come to an agreement but it had to be "the right deal".

Mr Alexander also applied pressure to the French to reform, saying: "In every one of the 21 years since the rebate was secured back in 1984, France has actually contributed significantly less to the European Union than the United Kingdom."

Britain's public gloom over the budget may be designed to put pressure on the former Communist countries of eastern Europe to accept a UK compromise from which they stand to lose most. In Budapest on Friday Mr Blair told the leaders of Hungary, Poland, the Czech Republic and Slovakia that, if his deal is rejected, it is unlikely that Britain will sign up to an alternative within the next six months.

In June, Mr Blair blocked an agreement on the 2007-13 funding package amid a bitter row with France. But he is now willing to cut Britain's annual budget rebate - worth €5bn-€8bn a year for 2007-13 - by as much as a fifth in exchange for lower overall EU spending. Most of this would come from a 10 per cent cut in regional funds for the new member states.