David Cameron Faces Europe Showdown As Tories And Labour Demand EU Budget Cut

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David Cameron is expected to face opposition on his EU budget | PA

David Cameron faces another bruising showdown over Europe on Wednesday with Tory backbenchers and Labour joining forces to demand a tougher line in budget negotiations.

The Prime Minister and Chancellor are said to have been holding personal meetings with wavering MPs as government whips struggle to minimise a prospective rebellion.

The EU's funding package for the next seven years is due to be decided at a summit next month, with Mr Cameron threatening to veto any increase above inflation - currently around 2%.

However, dozens of Conservatives have signed a Commons amendment urging him to hold out for a real-terms cut.

Labour has also said the budget should be reduced in recognition of the problems faced by member states, raising the possibility of an humiliating defeat for Mr Cameron.

Commons Speaker John Bercow is expected to confirm tomorrow morning that the amendment will be put to a vote, after the Opposition signalled it would not table a rival text.

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Mr Cameron could also be challenged on the controversial issue at the weekly Prime Minister's Questions session.

Although the result is not binding on the government, it would be awkward for the premier to defy the will of the House.

Tory rebels said they believed 40 to 60 of their colleagues were ready to back the amendment, including Mark Reckless, Mark Pritchard, Zac Goldsmith, Bill Cash, John Redwood, Bernard Jenkin and Peter Bone. Many more could abstain.

However, some rebels questioned whether all Labour MPs would turn up to support the call.

Government whips were also said to be "working very hard" and "going bananas" as they seek to convince backbenchers not to do anything to harm the coalition.

Mr Cameron and Mr Osborne have apparently been meeting MPs to urge them to fall into line.

"It is possible this could turn out to be a damp squib," one MP admitted, dismissing the idea of matching last year's 81-strong rebellion in favour of a referendum on EU membership.

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The European Commission has proposed a £826 billion budget ceiling for the 2014-2020 period - a 5% hike compared to 2007-2013.

But despite other members such as Germany joining calls for restraint, Downing Street has suggested a rise in line with inflation is the best outcome that can be achieved.

If no deal is reached at the summit the budget is automatically "rolled over" to next year with a 2% increase.

Meanwhile, a think-tank has suggested that Britain should offer to sacrifice its annual rebate to secure a deal for a significant real-terms cut in the Brussels budget.

The left-of-centre IPPR said such a "grand bargain" could be sold to the public if the cuts were deep enough to ensure that the UK's contribution still dropped overall.

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