THE long shadow of Margaret Thatcher still stalks the corridors of Brussels. Or so it appears. The sacrosanct British budget rebate, the product of the lady's handbagging of leaders in a spectacularly bitter meeting in Fontainebleau in 1984, is one of the most serious thorns in the side of Agenda 2000 negotiators today.
Now worth £2.5 billion a year to the UK, this uniquely British instrument is still defended both in principle and extent by New Labour ministers with the zeal of converts. Without it, they say, Britain's net contributions per capita would significantly exceed several wealthier countries.
Yet 14 member-states bitterly resent this privileged treatment, which they pay for, and are demanding at least a partial dismantling of the rebate in the short term as a prelude to its eventual abolition. The argument is both one about both cash and principle - many disapprove of institutionalising any recognition of the concept of "net contributions".
The British rebate formula allows them to receive back two-thirds of the gap between what they would normally pay and what they receive. And, although deeply cherished, it has one serious disadvantage - any increase in receipts cuts the rebate.
The result is that often the British government turns down the offer of considerable cash assistance from Brussels - as it has done, to the fury of farmers, over some £1 billion in unclaimed farm compensation for the rise in the value of sterling. This is because the Chancellor prefers to hold on to the lesser sums returning direct to him through the rebate than to see the farmers receive the compensation. Although the British Prime Minister, Mr Blair, still insists the rebate is non-negotiable it is unlikely that he will be able to avoid some kind of compromise.
That appears likely to come in the form of a complicated formula that will save British face by only clawing back windfall British rebate gains arising from an increase in internal spending when the Union is enlarged
At that stage money currently being spent on helping the acceding countries prepare for accession, and on which no rebate to Britain is paid, becomes internal EU spending on which a rebate is payable. Such windfall gains would clearly be unjustifiable even by Baroness T.