European Union To Demand Extra £1.7 Billion From Britain, Payable Days After Rochester By-Election

Britain is facing a shock EU demand for an extra £1.7 billion (2.1 billion euro) towards the European Union budget. The demand - which would add almost a fifth to the UK's annual contribution of £8.6 billion - is intended to reflect improvements to Britain's economy since the figures were last calculated.

It is due for payment on December 1 - just days after the crunch Rochester & Strood by-election at which David Cameron's Tories are struggling to fight off a challenge from anti-EU Ukip.

Cameron held talks this evening with Dutch counterpart Mark Rutte, who is also facing a large demand for more cash, on how they can challenge the surcharges. The surprise development is set to overshadow the European Council summit in Brussels, where Mr Cameron is meeting leaders of the 27 other EU States, some of which are looking forward to reductions in their contributions.

Preliminary figures seen by the Financial Times suggest that Britain is facing by far the biggest top-up, while the Netherlands is being asked for an extra 642 million euro. By contrast, Germany receives a rebate of 779m euro, France 1bn and Poland 316m.

A Downing Street source made clear the UK will challenge the demand. "It's not acceptable to just change the fees for previous years and demand them back at a moment's notice," said the source. "The European Commission was not expecting this money and does not need this money and we will work with other countries similarly affected to do all we can to challenge this."

The surcharge is affected by changes in the way the EU calculated gross national income, which now includes elements such as prostitution and illegal dogs, said the FT. But a Commission spokesman aid it was principally due to changes in the relative economic strength of the EU's member states.

"Britain's contribution reflects an increase in wealth, just as in Britain you pay more to the Inland Revenue if your earnings go up," said Patrizio Fiorilli, a Commission spokesperson.

Shadow Europe minister Pat McFadden said: "It's unacceptable that the outgoing EU Commission should spring a backdated bill on member states in this way. But UK ministers have known about this since last week.

"The Government should be pushing for the best deal possible for the UK. The Prime Minister must now make up for lost time, and should be working in step with other affected member states, including the Netherlands and Italy.

"This is a proposal made by the outgoing EU Commission, and with a new Commission taking office imminently. So it is imperative that David Cameron now urgently discuss this with other member states, and urges the incoming EU Commission to look again at the proposed change.

"Labour argued against the proposed increase in EU spending in 2012, and voted for a real-terms cut in the EU budget then. We have argued for reform of the EU budget, including a greater focus on generating growth and jobs, and for the EU to undertake a zero-based review of all spending by EU agencies."

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