UK needs to gather ‘like minded’ allies to prevent EU budget spiralling out of controll, warns Cameron

Reporting back to the House of Commons after the EU summit failed to agree the seven year budget between 2014 and 2020, Mr Cameron made it clear that he would not back down on his demands that the budget was cut, although he refused to set an exact figure.

He said that the proposal on the table of £973 billion was unacceptable and would not be agreed to by him.

He insisisted that the UK rebate was not up for negotiation and called on EU administrators to “wake up to the real world.”

He said a budget was “still doable” but in a stark warning over the deadlock on talks Mr Cameron said that if no deal could be reached exisiting spending limits would be rolled over leading to a budget tens of billions higher than the £973 billion on the table last week.

This would mean the annual maximum spending limit would have to be set annually in negotiations with EU heads of government.

H said: “It is in our interests to get a deal but that deal can not come at any cost.

“We must not lock in unaffordable ceilings for the next seven years.”

And to laughter from the Labour benches who have accused him of being isolted in Europe, he said the UK would need build a coalition to keep spending down.

He told MPs: “If necessary, we may have to galvanise a coalition of like-minded countries to deliver budgetary restraint through annual budget negotiations each year.”

After being pressed by Labour leadr Ed Miliband on who his allies were Mr Cameron insisted that he had managed to get strong support for his negotiating position from other net contributor countries including Denmark, Sweden, Holland and Germany.

He also quoted the German newspaper Der Spiegel which ran an online editorial thanking the UK for “saving us from the European beurocrats.”

Mr Cameron’s comments came as senior members of the partyy including Lonmdon mayor Boris Johnson suggested that the UK “has nothing to fear” from no deal being reached.

But the Prime Minminister was warned that the issue of Britain’s continued membership of the EU and pressure from Tory backbenchers for an in/ out referendum would hinder his efforts to build support for the uK position.

Mr Miliband said comments from high-profile Tories “undermined” the Prime Minister’s position.

He added: “It’s no wonder that everyone from British business to our European allies believe we are drifting towards the exit door.”

He went on: “As we anticipate further negotiations in the months ahead, the wider stance of the Government towards the EU will also have an impact.

“The Prime Minister has said repeatedly he is in favour of Britain remaining a member of the EU, but why is he allowing his colleagues to take the opposite position?

“Last month, the Education Secretary (Michael Gove) briefed that he is open to leaving the EU, on Saturday the chairman of the Conservative Party [Grant Shapps] said we should threaten to leave if we didn’t get a good deal, and now we have the new vice-chair of the Conservative Party [Michael Fabricant] touring the studios not about a budget deal, but a deal with the UK Independent Party.”

Tory Stone MP Bill Cash, who chairs the European Affairs Scrutiny Committee, led the charge from Tory Eurosceptics for calls for a referendum.

He demanded “fundamental change” between London and Brussels.

He added: “Do what the British people want and get on with it as soon as possible before it is too late.”

Veteran Tory Edward Leigh asked if Mr Cameron would grant a referendum “at an appropriate moment of the Prime Minister’s choosing, say around the next general election”.

Mr Cameron admitted there was “an opportunity for change”, highlighting his previous calls for “a new settlement” that would be put to Britons.

But the Prime Minister urged patience amid the ongoing single currency turmoil, telling the Commons that greater eurozone integration should happen first.

However, on a good day for the Prime Minister on the European issue, he was praised by notable Eurosceptics including Wellingborough MP Peter Stone for the hardline he had taken on the budget.

Earlier this month Mr Cameron had been humiliated by a defeat in parliament on calling for cuts in the EU budget when Labour joined with Eurosceptics to demand a reduction when Mr Cameron was aiming for a freeze.

Mr Miliband told Mr Cameron that “he should thank parliament” for giving him a strong mandate.

The Labour leadr also challenged him over the Comon Agricultural Policy payments which he said would still remain at 38.3 per cent of the budget under Mr Cameron’s proposals.

But the Prime Minister said that the European Council chaired by Herman van Rompuy had cut CAP from £336 billion to £270 billion in the proposal on the table last week.

However, he detailed other areas where he believed the EU could find significant savings.

It emerged that the Prime Minister had turned down the wine at the summit and just drunk water because he objected to the lavish expense.

In parliament Mr Cameron said: “Freezing the ceilings for security, justice and external spending would allow 7.5 billion euros of additional savings.

He told MPs a 10 per cent cut in the overall pay bill would save almost 3 billion euros while relaxing the rules on automatic promotion would save 1.5 billion euros.

He added that reducing the extraordinary generosity of the special tax rules for Brussels staff – the levy – that could save around another 1 billion euros and changes to pension rights could save another 1.5 billion euros.

In a direct attack on the European Commission, he went on: “When it came to the bureaucratic costs of the European Commission, not a single euro in administrative savings was offered. Not one Euro.

“We need to cut unaffordable spending.”

His call on Eurorats to “wake up to the real world” won him loud approval from the Tory backbenches.

Tory MP Michael Ellis said the “bloated Brussels bureaucrats are talking balderdash” by refusing to offer a cut when more than 200 European Commission staff earn more than the Prime Minister “and they are apparently on up to 93 holiday days a year”.

Mr Cameron told the Commons the UK’s annual rebate, worth about £5 billion, was never under threat despite calls from some countries for it to be scrapped.

“All of this was completely unacceptable; Britain more than pays its way in Europe,” he said.

“No government I lead will ever put that British rebate back up for negotiation.”

Former Liberal Democrat leader Sir Menzies Campbell backed Mr Cameron’s strategy on the budget negotiations, stating that his approach showed “engagement is always more effective than detachment”.