MPs to quiz Blair on 'rebate deal'

Tony Blair is under pressure in the Commons over the EU row today amid rumours he is planning a major concession on the £3billio-na-year rebate.

Sources in Brussels claim the Prime Minister is offering to forgo £430million a year due to be paid in contributions by poorer countries towards the British rebate.

The plan would cost Britons £3billion over a seven-year period while helping poorer new EU members such as Poland and Lithuania.

The stakes rose today when Luxembourg's Jean-Claude Juncker, the current EU president, added a debate on cuts to farming subsidies to the agenda for the budget summit which starts tomorrow. In talks before the gathering he said: "No budget heading ... will escape cuts". Signalling a row on the UK rebate, he added: "We have to take a detailed look at what to do with the British rebate; 24 member states believe the rebate can't go on like this. Britain is not the only net payer; the other countries would also like their contributions reduced."

The danger for Mr Blair is that the talks could expose him to more pressure if other countries fail to show support. However, the EU leaders do have the legal right to change the Common Agricultural Policy.

Mr Blair was meanwhile under fire for having signed the deal which protected the CAP for an extra seven years. Tories pointed out that he could have vetoed it and was therefore to blame for a system

he was now criticising as fundamentally wrong. But No 10 insisted that circumstances had changed, including the 10 new EU member states who were "more in line with our thinking".

Downing Street again refused to rule out cuts in the rebate, saying: "The Prime Minister has made clear this is not a dogmatic defence of the rebate per se."

Mr Blair could argue that it is not a cut in the rebate, which is due to rise in coming years as total EU spending goes up, but slower growth. The Prime Minister has been warned by allies that Britain's defence of the rebate is undermined by the fact that it causes much poorer countries to pay more into the EU pot.

The possible compromise emerged after talks with French president Jacques Chirac ended in "sharp disagreement" and Mr Blair looking increasingly isolated in defending the rebate.

Mr Chirac appeared to be fuelling antagonism towards Britain to divert attention from his own embarrassment at the French "non" to the failed EU constitution. The pair are also at loggerheads over Britain's opposition to a big increase in overall EU spending in a draft budget due to be agreed on Friday.

Opposition parties are expected to put Mr Blair under pressure in the weekly Prime Minister's Questions this afternoon.

Mr Blair finished a tour of Berlin, Luxembourg and Paris last night. There is rising speculation that Saturday's Brussels summit will go into overtime. He said he would only negotiate on the rebate, which is opposed by every other EU member, if France agreed to cut CAP subsidies.

A House of Lords committee today called for the CAP to be redesigned to help poorer EU states. It said direct payments to farmers should be scrapped by 2013.