EU proposes phasing out UK rebate

Britain's bitterly disputed European Union rebate should be phased out over four years and replaced with a partial refund for all major net contributors to the EU budget, the European Commission proposed yesterday.

The move came as the EU executive tabled proposals to boost overall EU spending to more than £900 billion over the seven-year period 2007-2013, mainly to cover the extra cost of integrating poor new east European member states.

A British government spokesman said London would not negotiate on the proposal, which he branded "a crude smokescreen to divert attention from the bloated budget proposals the Commission has brought forward to increase EU spending by 25 per cent".

The EU's six major net payers have already said the spending plans are too expensive and urged future expenditure be capped at one per cent of the bloc's gross national income, the level before 10 new mainly poor members joined in May.

EU Budget Commissioner Michaele Schreyer called her plan fair and balanced to reflect political reality.

"There will a phasing out on the one side and a phasing in on the other to take account of the political facts of life," she told a news conference.

Under the proposed new rebate system, all countries that make net payments of more than 0.35 per cent of their national wealth to EU coffers would get a refund of two-thirds of the excess, up to a total limit of €7.5 billion for all.

That would mean Britain's current €4.6 billion annual cheque back from Brussels would eventually be halved, while Germany, the Netherlands and Sweden would receive refunds for the first time.