The European Union has to radically reform its agricultural policies and ensure that no issue is off the table when it embarks on a wholesale review of its budget, UK Treasury minister Ed Balls said yesterday.

European governments have agreed to launch a review of the EU budget in 2008-09 after setting the financial envelope for 2007-2013 led to months of tortuous negotiation.

Balls, one of British Chancellor of the Exchequer Gordon Brown’s closest allies, told a parliamentary committee that the review was in early stages but had to satisfy three conditions.

“First, defining the scope of the review so that it is genuinely broad and conducted from first principles with no issues off limits,” said Balls, who is widely tipped as a future Chancellor if Brown succeeds Tony Blair as prime minister.

“Second, it must be based on proper and full evidence and factual analysis. Third, it must shape a radical, sustainable vision for the EC budget in the future that can start being implemented straight away.”

Balls said the latter must include a radical reform of the Common Agricultural Policy and the effectiveness of structural funds in supporting enlargement.

More than 40 percent of the EU budget is spent on agriculture and countries like Britain argue that subsidies to farmers in rich nations like France creates trade distortions.

Balls said the EU budget needed to address how the 25-nation bloc could stimulate faster growth, job creation and increased productivity and also ensure peace and security within Europe’s borders.

“We will need to ensure that the basic principles of sound public financial management which apply to spending at national levels apply equally to the EC budget,” he said.