By Paul Reynolds World Affairs correspondent

The British Government has rejected a proposal from French President Jacques Chirac that the rebate given to Britain on its contributions to the European Union budget be renegotiated.

Mr Chirac said that the rebate had less justification than earlier.

The British rebate was agreed at a summit in Fontainebleau back in 1984, after the then British Prime Minister Margaret Thatcher "handbagged" the community demanding her "money back."

Britain was paying in far more than it got back, largely because of the relatively small size of its farming industry.

Other member states argued that contributions were like taxes - nobody could claim back exactly what they put in, whereupon Mrs Thatcher said she would block a further expansion of spending and a settlement was reached.

Chirac wants the rebate back on the table

Essentially, the system has survived.

This year, Britain is expected to receive a rebate of some �3billion (five billion euros) out of gross contributions of about �6.5billion(10.5 billion euros).

It is therefore still valued by Britain.

A government minister said recently that it was "written in stone".

It runs until at least 2006 and therefore if reopened now, Britain says, it could endanger enlargement.

Unpopular

But it has always been unpopular with the others members, who have to pay for it.

Mr Chirac scornfully referred to it as the "British cheque" and apparently wants it on the table along with the farm subsidies from which France benefits and which are under question in the latest round of EU expansion.

There have been efforts over the years to make the budget simpler.

The largest contributions now come from direct payments linked to national income.

The European Commission President, Romano Prodi, would like an EU-wide tax instead - but that is some years off.