6 September 2010 Last updated at 12:31 ET

EU budget commissioner calls for UK rebate to end

European governments are gearing up for tough EU budget negotiations

There is no longer any justification for the UK's EU budget rebate - worth about 6bn euros (£5bn) last year - the EU budget commissioner says.

Janusz Lewandowski told the German daily Handelsblatt that UK income per head had grown markedly since former prime minister Margaret Thatcher negotiated the rebate in 1984.

"The rebate for Britain has lost its original justification," he said.

Next year the UK rebate will fall to about 3bn euros, he added.

At the time when Baroness Thatcher argued successfully for a UK rebate the Common Agricultural Policy (CAP) took up a bigger slice of the EU budget. The UK told its EU partners that its net contribution to the budget was too high, as the UK received much less in farm aid.

According to Mr Lewandowski, the much smaller CAP share of the budget now weakens the UK case for a rebate.

In 1984 the CAP accounted for 71% of the EU budget, compared with about 40% now.

But the commissioner said he was expecting "very tough negotiations" in the coming months over the EU budget for the period 2014-2020. He called himself an "honest broker" in the discussions.

UK defends rebate

A British government spokesman said the rebate "remains fully justified. It's a matter of fairness".

"Without the rebate, the UK's net contribution as a percentage of national income would be twice as big as France's, and 1.5 times bigger than Germany's. This is because of expenditure distortions from policies such as the CAP, which still accounts for more than 40% of the EU budget."

Several EU member states oppose the UK rebate, one of the main arguments being that the new, poorer member states in Eastern Europe, which joined the EU in 2004 and 2007, ought to get relatively more from the budget, in line with the EU "solidarity" principle.

The UK rebate amounts to roughly 66% of the difference between what the UK pays into the budget and what it gets back from the EU.

Mr Lewandowski is reassessing EU budget priorities as Europe strives for sustained growth

Four other net contributors to the budget also get rebates: Germany, the Netherlands, Austria and Sweden.

The 27 EU member states pay a fixed contribution to the EU budget, based on their gross domestic product and a percentage of their sales tax (VAT).

This year Germany's transfer to the EU budget - the largest contribution - is about 21bn euros (£17.5bn).

EU taxes

The European Commission has run into opposition from member states over its plea for an increase of nearly 6% in the EU budget for 2011 compared with this year.

The EU's budget for this year is 122.9bn euros (£110bn) - 6% bigger than the 2009 budget.

Mr Lewandowski reiterated that the commission was looking at ways to boost the EU's own revenue, but any proposals on that would not come until next year.

Last month several countries rejected his idea of levying direct EU taxes.

"New EU resources could reduce the national contributions and so ease the finance ministers' job of consolidating their budgets," he told Handelsblatt.