Brown 'No' to EU £40bn rise plea

GORDON Brown will today reject explosive demands for a £40bn increase in the European Union's budget.

The Chancellor will instead seek far-reaching reforms to keep a lid on the amount of money squandered by Brussels every year.

His blunt message will come on the eve of European Commission president Romano Prodi's demand for a multi-billion-pound rise to help the former Warsaw Pact countries which will join the EU in May.

In a move that will infuriate Brussels, Brown will publish an ambitious blueprint to transform the EU budget.

It will demand a wholesale review to discover where money could be better spent and declare that Brussels is expected to use the 'same rigour' on spending as national governments.

'Poorly performing programmes should be displaced or redirected,' it says. Brown also seeks 'proper controls to minimise fraud and financial irregularities'.

The proposals go on to list a limited number of areas where Britain believes EU spending can 'add most value'.

This includes cross-border transport, the single market, support for countries 'where needs are greatest' and action on issues such as foreign aid.

In a further challenge, Brown will criticise 'inequitable' spending in crucial areas such as farm subsidies. The Common Agriculture Policy eats up almost half of the EU's £75bn budget and benefits France more than any other country.

The document tells EU officials to abandon the 'automatic assumption that a certain level of spending is needed to meet the Union's objectives'.

Brown stresses the need for a cap on EU spending at 1% of gross national income. The Commission wants a cap of 1.24%. This would see the EU budget soar from £75bn this year to £ 116bn by 2013 - a £41bn increase.

The Chancellor signalled his determination to pursue EU reforms 'aggressively' at the weekend meeting of the Group of Seven richest countries in Florida where he was buoyed by upgraded forecasts for British and world growth.

He hoped stronger growth for Britain in 2004 would help to trim the ballooning budget deficits which have raised fears that the Government-will increase taxes. 'The world economy is growing faster than people thought and the British economy is growing faster than last year,' said Brown. 'Every region of the industrialised world is now growing.'

At the heart of the Florida discussions was the dollar's collapse against the euro, which is seen as harming a European recovery. But the Europeans failed to win concessions from the US team other than a pledge to combat 'disorderly markets'.

The result could be that the dollar comes under fresh pressure in Asia and in Europe when markets reopen today.

Any fall in the dollar may trigger further rises in the pound.

Brown remains critical of the eurozone countries and the way they manage their economic affairs. He wants major reforms of the European Central Bank, labour markets and the markets for services such as telecoms and electricity as the price for Britain even considering entry.