Tony Blair insisted that reform of the EU's �30bn a year farm subsidies remained "inevitable" despite a Franco-German deal putting off any changes until at least 2013.

Mr Blair, speaking at the European Union summit in Brussels, also stressed that the UK's budget rebate was not up for negotiation.

The UK wants more done to reduce the Common Agriculture Policy, which accounts for just over half of all EU spending.

This argument will go on at this summit, after this summit and over the next few years

Tony Blair

Referring to French determination not to see farm spending cut, he said: "We understand the concerns that countries have about protecting their industry, but in the end the world is only moving in one direction and that is [trade] liberalisation.

"This argument will go on at this summit, after this summit and over the next few years."

He said that farm subsidies were inconsistent with promises made to the developing world.

Handbagging

On the UK's rebate he said it was "simply not an issue here. There can be no question of that".

The UK prime minister met French President Jacques Chirac on Thursday evening and had with him a range of figures designed to prove the discount - famously negotiated by Margaret Thatcher in 1984 - was as justified as ever.

The summit, which is being chaired by Danish Prime Minister Anders Rassmussen, is focusing on trying to lay the path for 10 countries to join the EU in 2004.

Mr Chirac has been under pressure to defend the Common Agricultural Policy as enlargement goes ahead but on Thursday he sealed a deal on the issue with Germany.

Enlargement progress

Under the agreement it seems now agricultural subsidies would not increase beyond the rate of inflation until 2013.

The surprise Franco-German pact was partially welcomed by UK Foreign Secretary Jack Straw who said that although it had stopped short of scrapping the CAP, it achieved the British goal of putting a cap on the amount of money spent on agriculture and farm subsidies.

Thatcher's "handbagging" won the rebate in 1984

He insisted that the agreement must not mark the end of the reform process, adding: "What we now want is more fundamental reforms."

But after the deal, Mr Chirac seemed to renew his calls for the UK's rebate to end.

"We want to limit expenditure in all areas, not only in agricultural spending," he said.

"In this general context we should also examine the problems of compensation which certain countries enjoy, in particular Britain."

Rebate 'off the agenda'

A UK government spokesman said Mr Blair's talks with his French counterpart had been wide-ranging and "good natured".

"They both accepted that the terms of the 1999 Berlin summit (which guaranteed the rebate until 2006) stand," said the spokesman.

Mr Straw has argued that even after the rebate the EU spent less per head in the UK than any other country.

The UK rebate was originally granted because it was paying more into the EU than it got back, largely because of the relatively small size of its farming industry.

It was agreed at a summit in Fontainebleau, after Margaret Thatcher "hand-bagged" the community demanding her "money back".

This year, the UK is expected to receive �3bn back, out of gross contributions of about �6.5bn.

The deal runs until at least 2006 and therefore if reopened now, the UK says, it could endanger enlargement.

It has always been unpopular with other member states.

'A fudge'

Shadow rural affairs spokesman David Lidington told BBC Radio 4's World At One he felt an opportunity to reform the CAP had been missed.

"I have always rather expected we might end up with a fudge this time round.

"What is disturbing is that our prime minister does seem to have been somewhat out-manoeuvred, taken by surprise, by the Franco German agreement struck last night.

"It is disturbing that it looks as if there might have been some back street deal which preserved the CAP pretty well unreformed in its structure not just to 2006, but all the way through to 2013 and I think that would have been an opportunity missed."

Liberal Democrat foreign affairs spokesman Menzies Campbell said: "This has all the hallmarks of a 'pre-emptive strike' before the EU summit. The British rebate is not up for renegotiation."