Tony Blair was humiliated yesterday when Jacques Chirac attacked Britain's £3 billion EU rebate hours after the Prime Minister had come to his aid in a row over economic reform. In the latest clash between the leaders, the French president pocketed a deal designed to help him win a Yes vote in France's referendum on the EU constitution on May 29. But instead of repaying the Prime Minister by avoiding sensitive issues before a likely May election in Britain, he went out of his way to complain about the rebate Margaret Thatcher won in 1984.He launched his attack - in response to a question about the shape of the budget from 2007 to 2013 - during a press conference soon after Mr Blair left an EU summit in Brussels. "We can only truthfully achieve an appropriate balance if we reopen the debate on the British cheque [rebate]," he said. The rebate might have had some justification when it was secured by "Monsieur Thatcher" - an interesting slip of the tongue - but it could "no longer be justified; it is from the past".
British officials, who had spent two days denying that the rebate was an issue at the summit, immediately circulated a four-page document setting out why it had to be defended at all costs. The rebate aims to address the way that EU spending is dominated by agricultural subsidies largely favouring small farmers. There are millions of smallholders in France, which designed the system, but few in Britain. A Government spokesman said the rebate was "fully justified in 1984 and is fully justified now. Even with it, Britain pays two and a half times as much into the EU budget as France in absolute terms. Without it, it would be 14 times as much. Between 1984 and 2002 Britain paid £38 billion into the EU budget, compared with France's £19 billion.
Senior Conservative MPs interpreted Mr Chirac's comments as a sign that Mr Blair was not defending Britain's interests in Brussels. Graham Brady, the shadow Europe minister, said: "The rebate was won by a Conservative government and is absolutely crucial to the UK. Given Labour's record of surrender in EU negotiations, we simply do not trust this Government to keep it." Speaking shortly before Mr Chirac's outburst, Jack Straw, the Foreign Secretary, promised to support the use of Britain's "absolute veto" to protect the rebate. While that is the official line, Mr Blair is keen to strike a deal on the rebate at a Brussels summit in June even if it involves compromise. He wants the issue to be dealt with quietly behind the scenes, with a decision reached shortly after the election expected on May 5. Sources say that this would avoid the rebate becoming a divisive issue between the Yes and No camps during the British referendum campaign on the constitution.
Mr Chirac's intervention was particularly painful for Mr Blair because he regards France as a potential ally in a broader battle against European Commission attempts to raise the union's budget to 1.26 per cent of GDP. The fight to limit the budget was supposed to unite six of the largest net contributors to EU coffers: Britain, France, Germany, Austria, the Netherlands and Sweden. But Mr Chirac said the budget battle was being led by "Germany, France and some others" and that scrapping Britain's rebate was "the key" to reaching a deal.
He boasted of his success in scrapping a package known as the services directive, strongly backed by Britain. A new directive would take into account the "European social model", Mr Chirac said, using EU code for retaining lavish welfare rights and worker protection common in the highly regulated markets of continental Europe. His words contradicted Downing Street claims that the directive was alive and well. It is aimed at slashing the bureaucracy that service industry professionals face when moving from one EU state to another. Mr Blair left the two-day summit without speaking to reporters. Only after his departure did officials from other nations disclose details of an ill-tempered debate over the services directive.