Treasury attacks EU's 'unrealistic' new budget plans

THE Treasury has attacked plans for an inflation-busting rise in EU spending as "completely unrealistic" in the midst of a recession which has forced national austerity measures across Europe.

The controversial proposal from Brussels comes just days after Prime Minister David Cameron hosted Commission President Jose Manuel Barroso at Downing Street and told him the hard-pressed public would not understand anything above an increase in line with inflation - a real-terms freeze.

Last night Mr Barroso unveiled his plans after getting approval from fellow commissioners and hit back at governments condemning the budget without having studied it.

"This is an extremely serious, credible proposal, and to say 'no' to something which was only adopted two or three hours ago is not serious or credible," he said.

"I would issue this plea to all capitals - before saying you don't agree at least read the proposals."

The Commission says its plans will give the EU an average annual budget over seven years from 2014 of 125 billion a year.

That, say officials, amounts to 1 per cent of the combined GDP of the 27 member states - the same GDP share as the current EU budget.

But in cash terms it represents an increase of more than 10 per cent - way above inflation. And the Treasury estimates it would add 10 billion to the UK's contributions to the Brussels coffers over the seven-year period.

The UK Government response issued by the Treasury said: "The European Commission's proposal is completely unrealistic. It is too large, not the restrained budget they claim, and incompatible with the tough decisions being taken in countries across Europe."

A Downing Street spokesman joined condemnation of the plans, reminding Brussels of a letter published last December by Britain, France and Germany urging that the EU creed "should not be to spend more, but to spend better."

Europe's Budget Commissioner Janusz Lewandowski countered that most national budgets in the EU have actually been growing - but at lower increases since the recession.

Only four national budgets are not growing, he insisted - those of Greece, Ireland, Portugal and Spain, where the economic squeeze is worst.

The Commission's budget plans include raising funds from a direct EU tax from a levy on European banks - a "Financial Transactions Tax".

Mr Barroso also warned of a complete rethink of the rebate system under which Britain has benefited from billions of pounds off its EU bills for more than 25 years because of an imbalance between of contributions