Chancellor of the Exchequer Gordon Brown reiterated yesterday that Britain's cherished rebate from EU coffers is not up for negotiation and his government would use a veto to protect it if necessary.

Luxembourg, holder of the EU's presidency until July 1 when London takes over, has proposed freezing the rebate at its 1997-2003 level in 2007 and later "set it on a downward path".

Asked on BBC radio if Britain would accept a freeze, Mr Brown said: "No."

"We are not going to negotiate away the rebate. That is simply not up for negotiation," Mr Brown said.

"We have said very clearly that not only is the rebate justified, but if in the national interest it was necessary to do so we would have to use our veto," he said.

The rebate, worth some €4.6 billion annually, was won in 1984 by then British Prime Minister Margaret Thatcher. It is enshrined in EU regulations and would require unanimity to abolish or modify.

British Prime Minister Tony Blair, under pressure from EU leaders to give ground over the rebate, insisted on Wednesday the payback would stay.

With his choice of words, however, he left himself some room for manoeuvre over the future size of the refund.

EU leaders meet in Brussels on June 16-17 and are eager to strike a deal on the bloc's 2007-2013 budget to shore up confidence in the EU given the crisis over a new constitution.

Britain's defence of its rebate is a major sticking point.