Blair gives away £2.7bn to clinch EU budget deal

The Prime Minister sacrificed an extra £2.7 billion today to salvage an EU budget deal he insists is in Britain's interests.

Tony Blair had already surrendered £5.5 billion in rebate cash ahead of a crucial summit in Brussels.

During fraught negotiations he offered up a further £1 billion from the rebate won by Margaret Thatcher in 1984.

And increases agreed in the 2007-2013 budget after 17 hours of talks will cost Britain another £1.7 billion.

Mr Blair had gambled on getting a French commitment to give up lavish farm subsidies in return.

But the final deal let French president Jacques Chirac off with just a promise of a farm spending review in 2008 - and no risk to Paris of losing its Common Agricultural Policy handouts before at least 2014.

Before leaving Brussels Mr Blair insisted the deal secured Europe's economic future, providing vital new funding for the latest - and poorest - EU member states.

"This is an agreement that allows Europe to move forward," the Prime Minister said.

"It allows us to demonstrate the right solidarity with the new member states. For those of us who have championed enlargement of the European Union this is an important point. It allows us to develop a different perspective for the future, in order to reform the budget so that it better meets the needs of modern Europe.

"And it has been extremely difficult, it has taken difficult compromises on behalf of everyone.

"I think it removes one major obstacle to Europe in moving forward in the right, modernising direction and I'm pleased to have been able to reach agreement."

Under the deal the EU contributions of all member states rise substantially - in Britain's case by 63% to £42 billion. But French contributions will rise by 116% and those of Italy 130%.

The readjustment brought Britain into line for the first time with the amounts similar-sized countries paid, said the Prime Minister.

He said he would be criticised at home - but it was wrong to believe that only Britain was facing increased costs. All member states were sharing the burden of funding the expanded EU - and the cuts in the British rebate were coming off increases in the clawback generated by the larger budget.

Today's deal was brokered with the help of German chancellor Angela Merkel, who acted as go-between in talks with Mr Blair and President Chirac.

It was late evening before Mr Blair felt ready to table his final budget offer, emerging from the negotiations briefly to tell journalists: "It is for people to make up their minds, frankly, whether they want to do a deal or not."

It had been an "extraordinarily complicated" negotiation in which 25 nations all had their own particular financial interests.

The budget package is worth 862 billion euros (£584 billion) - an increase on the 849 billion-euro limit Mr Blair had proposed when the summit began.

Mr Blair's original aim of keeping the overall EU budget spending limit at no more than 1% of the national wealth of the 25 member states, has disappeared in the search for compromise.

The final deal absorbs the equivalent of 1.045% of combined national wealth.

But an earlier, failed, attempt at a deal last June would have cost 1.06% of EU national wealth.

And European Commission president Jose Manuel Barroso still insists the EU needs access to the equivalent of 1.24% of EU national wealth to meet its increasing financial needs.

Nevertheless Mr Barroso praised Mr Blair today for getting a deal at all.

"The British Presidency deserves praise of what it has achieved. I want to say that publicly, even though Prime Minister Blair and I have not always agreed on the budget - because he is a tough negotiator."

Mr Blair shrugged off new shadow foreign secretary William Hague's comment that the Government had "surrendered" on the budget.

But the Prime Minister will face a rough ride from opposition MPs in the Commons when he reports back on Monday.

Mr Hague declared: "Seldom in the course of European negotiations has so much been surrendered for so little.

"It is amazing how the Government have moved miles while the French have barely yielded a centimetre.

"It now seems that if there is a deal it will be a bad one for Britain, for the EU and for the developing world."

Failure to secure a deal would have marked a dismal end to Britain's six-month presidency of the EU.

It would have been a personal blow for Mr Blair, who came to power eight years ago pledging to increase British influence in Europe.

Failure to agree would also have increased gloom within the EU following France and the Netherlands rejection of the Constitution earlier this year.

Mr Blair said there was "an increasing view virtually everywhere in Europe" that a fundamental review of the budget was necessary and the deal allowed for that - avoiding the risk of freezing the process of EU enlargement.

"I do not doubt that I will get a certain amount of criticism from people who say I have gone too far, people who say I have not gone far enough. But in the end this is about getting an agreement that allows Europe to move forward. I think it does," said Mr Blair.