Scrap EU rebate in return for reform, says Prescott

The UK was "sold a pup" in 1984 when Margaret Thatcher negotiated the rebate, the Deputy Prime Minister argued in comments which underline Britain's desire for a settlement on EU financing by the end of the year.

The Common Agricultural Policy is not going to be reformed overnight, Mr Prescott admitted, but the UK is searching for a firm pledge to re-examine it. The key, he told The Independent, "is whether it really does mean change or a fudge".

His language on the rebate is softer than that used by British ministers before the last summit broke down on the issue in June when they insisted it was fully justified.

Mr Prescott said that, under Mrs Thatcher, the UK had "a fundamental chance" to change the structure of European financing but "we ducked it and we took the [rebate]".

"It didn't solve our problems," he said, adding that the UK remains a big net contributor to an EU budget more than 40 per cent of which goes to agriculture.

"This time, Blair is embarking on something more fundamental than taking the cheap option," he said.

In June, the UK helped block a deal on EU financing for 2007-13 at a fractious summit in Brussels, though Tony Blair later said the rebate could be on the table if the CAP is reformed.

Mr Prescott's comments go further because they characterise the rebate as a historical mistake and suggest its abolition could prove beneficial to the UK, if the right deal is reached.

The UK, which now holds the rotating EU presidency, is anxious to get a deal on financing at a summit in December.