Brown claims victory in fight to curb EU budget

Gordon Brown has struck a deal to derail Brussels plans for a rapid expansion in the EU's budget, wresting back control for the finance ministers of member states.

The European Commission had proposed raising spending to €1 trillion, 1.6 per cent of the EU's national income, between 2007 and 2013.

But a group of six countries, led by the Netherlands, insisted that, instead of the Commission dictating the budget, the finance ministers should set bottom-up spending priorities. 'The big difference that has happened here is that this is a massive rejection of Commission control of the budget process,' said a Treasury source.

The Dutch finance minister, Gerrit Zalm, chairing the weekend meeting of finance ministers in the Dutch resort of Scheveningen, said the existing budget proposals did not command support.

The Chancellor, Gordon Brown, and French finance minister Nicolas Sarkozy, both spoke opposing the rapid growth in spending, which the Treasury said amounted to a 30 per cent increase in real terms.

Brown pointed out that if one of the eurozone member-states proposed such a rapid increase in spending in its domestic budget, it would probably be censured by the Commission under the rules of the Stability and Growth Pact, which control spending.

He and Sarkozy backed the Dutch plan, known as 'building blocks', under which member states will first negotiate on which areas should get extra cash, before spending plans are agreed.

The Treasury is keen to keep a ceiling on total EU spending, and to redirect money towards Britain's priorities of enhancing employment and competitiveness, rather than to areas such as culture and health which had been due to get hefty increases under the Commission plan.

Late on Friday, the Treasury released a scathing assessment of the EU's progress towards its goal of making Europe the world's most competitive market, and creating millions of jobs, by 2010.

Meanwhile, a predicted row about Britain's annual rebate from the EU - secured by Lady Thatcher 20 years ago when the UK's economic performance was lagging behind that of France and Germany - failed to arise at the talks.

Several finance ministers have suggested that in the new 25-member EU, Britain should no longer receive the payment, which is calculated using an arcane formula, and amounted to more than £3.5bn last year.

Brown challenged his fellow finance ministers to comment on the rebate, but was met with silence.