The British government is holding out for further CAP reform in its latest EU budget proposal, due to be discussed by EU heads of state in Brussels tomorrow (Thursday).

In line with last week’s proposal, which itself was widely condemned by other member states, the new plan calls for “a comprehensive and wide-ranging review” in 2008.

“There can be no fundamental change in the UK’s rebate without a fundamental reform of the CAP,” said UK foreign secretary Jack Straw in a statement to the House of Commons.

This is likely to be fiercely resisted by the French and the Irish in particular in Brussels over the next couple of days.

The new budget proposal does include a slight increase in the spending ear-marked for the new member states compared with last week’s proposal.

But overall, the total budget for the next seven years comes to just €849bn (£578bn), or 1.03% of gross national income, compared with the €929bn (£632bn) the EU Commission had originally asked for.

The amount earmarked for direct payments to farmers and market supports comes to €293 (£199bn) over the seven year perspective – in line with the agreement struck by heads of state in Brussels in 2002.

The major savings the UK is after are in the area of rural development.

Compared with the €89bn (£60bn) the EU Commission suggested, the latest UK proposal pencils in €66.34bn (£45bn).

The text also calls for up to 20% voluntary national modulation, to allow member states to top up rural development funds by taxing single farm payments.

And it seeks an end to match funding of modulated monies by national governments.

The plan has been severely criticised by environmental lobby groups. RSPB chief executive Graham Wynne said the cut in rural development funding would spell disaster for wildlife.

“Budgets to protect wildlife are already too small and this latest penny pinching proposal will put even more holes in Europe’s threadbare wildlife tapestry.”

Country Land and Business Association economist Allan Buckwell said the UK government’s approach to the budget was contrary to its enthusiastic promotion of rural development policies.

“It’s a thundering disgrace,” he said.