Britain in Row with EU over Budget Rebate

Britain is preparing to face off with its EU partners over plans to bring its €3 billion EU budget rebate to an end and make Britain the largest net contributor to EU funds, relative to the size of its economy.

The European Commission's plans for the budgetary period from 2007-2013, drawn up by German budgetary commissioner Michaele Schreyer, would bring to a close the rebate which has been in place since 1984. If it is abolished, Britain will become the biggest contributor to the EU's €100 billion a year budget and contribute 0.51 percent of its gross domestic product (GDP), compared to 0.35 for Italy and 0.31 percent for France, countries of a similar size and wealth.

The rebate was originally introduced as compensation for Britain which paid much more into EU coffers than it got back, largely because it benefited less than other member states from the common agricultural policy. Prime Minister Margaret Thatcher secured the deal with German Chancellor Helmut Kohl and French President Francois Mitterrand after famously demanding: "I want my money back."

Funds for new states prompt rethink

But the introduction of ten new member states in May means that new EU regional and structural funds go largely to the accession countries, narrowing the net contributions gap between Britain and other veteran members. The commission says that if things are not changed, Britain would pay just 0.25 percent of its GDP to the EU between 2007 and 2013, compared with, for example, 0.56 percent for The Netherlands and 0.54 percent for Germany.

"The UK is going to become the smallest net contributor to the EU budget ... as a result, the current system of a correction reserved exclusively for the UK cannot continue," Schreyer told reporters.

Instead, Brussels proposes a "general refund mechanism," which would share out the rebate equally between all member states whose contributions to the EU exceed 0.35 percent of their GDP.