Britain will unveil proposals for a downsized European Union budget today and agree to give up part of its rebate from Brussels.
EU diplomats said London would propose cutting €15 billion from planned aid to poor new east European member states, despite their protests to Prime Minister Tony Blair last week, and €5 billion off rural development funds for western Europe.
In a bid to clinch a deal on the 2007-2013 budget at a summit he chairs next week, Mr Blair will offer to forego more than €1 billion a year of Britain's annual refund to share the cost of the bloc's eastward enlargement last year.
Failure to agree on a long-term budget at the two day summit, schedule to begin on December 15 th, would deepen a crisis of confidence, triggered by French and Dutch voters' rejection of the EU constitution, and could isolate Britain politically in Europe.
But EU officials voiced optimism that a deal was within reach because Blair was willing to touch the hitherto sacrosanct rebate and had dropped his insistence on a promise to cut farm subsidies, which mostly benefit France.
Mr Blair has said the bulk of the rebate would stay because it is linked to farm subsidies, and the amount returned to Britain will still rise, not fall, from the current €5.6 billion a year as the overall EU budget grows.
The British proposal will cut between €20 and €25 billion from the €871 billion budget proposed by previous EU president Luxembourg in June and accepted by most countries.
The lower overall expenditure figure of 1.03 per cent of EU output rather than the 1.06 per cent proposed by Luxembourg will help cut the payments of big net contributors Germany, the Netherlands and Sweden.
The Dutch and Swedes joined Britain in voting against a deal in June, as did Finland and Spain.
But Blair has had to abandon hopes of persuading France to accept fundamental reform of EU farm subsidies, drawing fierce criticism from his Conservative opposition at home.
Britain has set a target of achieving rough parity in its net payments compared to those of France and Italy under the proposal, details of which are due to be announced by Foreign Secretary Jack Straw this afternoon.