David Cameron finds an unusual EU budget cut ally in Herman van Rompuy - but agreement still looks out of reach

By Matthew Barrett
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According to the Guardian this morning, the Government has accepted that Britain will contribute more to the EU, regardless of the outcome of negotiations at the Brussels summit tomorrow.

The Guardian's story comes in three parts. The first is the news that backbench Tories have an unusual new ally: Mr Herman van Rompuy. Mr van Rompuy, the President of the European Council, has proposed a cut to the European Commission's budget. He would like the budget to be a mere €973.2bn, down from the previous proposal of €1,053.2bn. Mr van Rompuy's proposal is also, as Tory MPs voted for, lower than the current budget, which is €993.6bn.

Secondly, the Prime Minister will go to Brussels with the aim of securing at least a freeze, and at best a real-terms cut. While Mr van Rompuy's proposal would fulfil this aim, and, as above, please the backbenches, it is all academic - because France, Spain and Poland will not agree to it, as it would cut the Common Agricultural Policy, and also the structural and cohesion funds, which essentially subsidise infrastructure spending in poorer eastern European countries.

Britain is hopeful of cutting the European budget by focusing on administrative costs (which are set to rise to €63bn) rather than tricky areas like the CAP. In contrast Mr van Rompuy, an administrator, would cut the administrative budget by only €1bn.

Thirdly, there is the issue of higher payments from Britain regardless of a freeze or cut in the overall budget. Britain's rebate is worth £3.6bn annually. Mr van Rompuy wants this to be reduced, and for Britain to pay more towards the European budget. The rebate means that Britain's net contribution in 2011 stood at £7.3bn, compared with £6.5bn for France and £11bn for Germany. Removing the rebate would have meant Britain paying £10.9bn last year.

However, Britain accepts it will end up reducing the size of the rebate. Tony Blair agreed that this should be the way forward in 2005, in order to compensate for the entry of poorer nations in eastern Europe. The Government is determined to protect the rebate for now. A spokesman is quoted as saying: "We are looking to get the best deal for the UK taxpayer. That means holding down the total level of spending and protecting the UK's rebate."

The outcome of the budget talks will obviously be watched closely in Westminster, and a negative outcome, or even a very limited success, will be viewed by many backbenchers as further proof that 27 nations with so many divergent needs and desires cannot effectively agree to reforms of the European institutions in a way the British people would consider satisfactory - unless something like David Davis' renegotiation-referendum jolts member states and the European elite into action.