Blair negotiates away Britain’s rebate

After months of wrangling over the future financing of the EU, its 25 national leaders finally agreed a new seven-year budget in the early hours last Saturday, said the FT.

Tony Blair, hosting the talks as the last fling of the UK's six-month presidency, got little credit this side of the Channel for conceding £7bn of Britain's famous rebate a long-standing priority of UK foreign policy. But the deal should take some of the bitterness out of the EU's internal relations, which is a good thing.

However, the big downside is that it grows the EU budget. The overall budget grows to 1.045% of EU output, well below the 1.24% demanded by the European Commission, but up from the UK's original 1.03% proposal. This means the 2007-2013 budget is €862bn (about £570bn). Shockingly, an even higher proportion will now go to farming, and the share going to research and development will shrink. In practice, this means Blair's deal is a modest "sticking plaster" buying time for more serious reform until 2008/2009, if it isn't vetoed by the French again.

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But let's look on the bright side, said The Independent on Sunday. The only alternative to this was no deal at all which would have sowed chaos and division. Now, having shown willingness to compromise on the rebate, Britain is better placed to muster support against France's protectionist intransigence on the Common Agricultural Policy (CAP). With luck.

What utter rot, said The Sunday Times. "When the French start praising Tony Blair's negotiating position" as courageous and moderate, you know something has gone wrong. First, Blair screwed up by trying to make out that a rebate-for-CAP reform deal might be possible. It was never a possibility: the CAP has been set in stone until 2013 since Blair let himself get ambushed by Chirac and Schrder three years ago. Then he screwed up again by alienating the new EU members with his pre-summit proposal that spending on them, not the CAP, should be cut. Under this deal, Britain's net contribution rises from £3.5bn to nearly £6bn a year. "And for what? Next to nothing."

But with the rebate non-negotiable unless the UK chose to negotiate, Blair was in a really strong position. On behalf of Britain, Blair should have walked away rather than agree this deal but then he has always had reputation as a "soft touch when it comes to hard bargaining", and now he's so anxious about his so-called legacy he can't bear to risk being seen as an EU wrecker. Domestically, Blair has caved in to the unions on pensions and his own back-benchers on a range of reforms. But now that he is "negotiating away Britain's interests" on the international stage, we should all worry. Gordon Brown, for one, "is fuming. He is right to be."

This week, the Treasury got a warning from the International Monetary Fund, said Alex Brummer in the Daily Mail. The IMF is reasonably upbeat on the state of the economy, but worried about public finances. It is disturbed by the moveable feast that is Brown's golden rule, and is urging big cuts in public spending.

The next spending round in 2007 already looks tight, said James Blitz in the FT. So when Blair pledged an extra £7bn (covering 2007-2013) to Brussels, you can see why the chancellor might be alarmed: it "creates a far steeper shortfall than the Treasury might have been expecting".

Still, Brown should take some comfort, said Bronwen Maddox in The Times. The new EU deal leaves Blair's successor in a win-win position: "a tiny hope" of genuine EU reform in 2008 plus "every reason to blame Blair if that fails".