Britain will come under renewed pressure on Monday to compromise over the future of the rebate on its contributions to the European Union as the price of a deal on the EU budget.

EU foreign ministers meet in Brussels on Monday for their first formal discussion of finances since negotiations collapsed in acrimony in June. Britain expects to be told that unless it offers concessions on its £3bn rebate, it will have to give up hope of agreeing a budget during its six-month European presidency, which ends at the end of this year.

The prime minister’s allies know that any movement on the rebate, secured by Margaret Thatcher 21 years ago, would expose him to a ferocious attack by the Conservatives at a time when his authority is already being tested by his own backbenchers.

Whitehall insiders acknowledge that a budget deal now looks increasingly unlikely.

One option currently being floated in Brussels would allow Britain to preserve the rebate, but increase the contributions it makes into EU coffers.

A senior EU official said: “The Brits have three options. They can refuse to move on the rebate, in which case they will pull the negotiation down. They can agree to a change in the rebate, or they can find some way of paying more into the EU budget while leaving the rebate unchanged.”

The compromise plan could see the UK giving the EU a bigger proportion of its VAT receipts, customs duties or levies on imports of agricultural produce.

The official added that such a concession could be attractive to Mr Blair “because the rebate, with all its symbolism, would remain unchanged and yet Britain would be fair to the new EU member states”.

Mrs Thatcher won the rebate at the Fontainebleau summit in 1984 because at the time the UK was relatively poor and received little from EU spending programmes skewed towards farm support.

All 24 of Britain’s EU partners would like to scrap the rebate, arguing that the country is much richer than it was two decades ago. Even the prime minister has acknowledged that it has to change.

But a summit called in June to agree EU finances until 2013 sparked a furious row, with the French and Germans blaming Mr Blair for failing to accept a compromise put forward by Luxembourg. That would have involved the loss of about a third of the rebate, Britain said.

One Whitehall official conceded that Jack Straw, the foreign secretary, who is to attend today’s meeting, would face a “battering” from his European colleagues.

“Monday is going to be a session of posturing by all those who think things have got to move on this,” the official said. “We won’t go into negotiating compromises at all. This will be everyone taking a pot-shot at us and trying to intimidate us into thinking we have to move. They will all be saying that the Luxembourg proposal, with all its manifest lack of balance, is the way forward. It’s completely unacceptable.”

Mr Straw will tell his EU counterparts that Britain wants to focus on “restructuring” and “modernising” the budget through adjusting agricultural subsidies and inserting a review clause into the deal. Only after such issues are addressed is the UK planning to move on to the issue of the British rebate.

But with only six weeks to go before December 16, the last date a deal can be concluded under Britain’s presidency of the EU, France will challenge it to offer a clear compromise on the rebate to prove it is serious about securing agreement on the budget.

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