25 October 2012 Last updated at 17:13

EU budget: Cameron urges spending restraint in Van Rompuy talks

Mr Van Rompuy has urged the UK and other EU members to compromise

David Cameron has said EU spending must be kept under control, as he met European Council President Herman Van Rompuy for talks in Downing Street.

Mr Cameron has threatened to veto the 2014-20 budget if Brussels insists on an above-inflation rise of 5%.

Mr Van Rompuy is urging states opposed to the budget to reach a compromise.

But Denmark has said it will veto the six year budget unless it gets a rebate on its contribution, similar to that negotiated by the UK and other nations.

In comments to reporters as the two men prepared to go into their talks, the UK prime minister said "how important it is to keep our costs and spending under control" in the 27-member union.

No 10 said the two men met for 80 minutes and were joined briefly before lunch by Deputy Prime Minister Nick Clegg.

Mr Cameron and Mr Clegg have occasionally clashed over Europe but Downing Street said the two were united in wanting the EU to show restraint and realism in its budget negotiations.

"Both the prime minister and deputy prime minister made clear the government's position that we don't support any real-terms increase in the EU budget," a spokeswoman said.

"They reiterated that at a time when EU member states are making tough decisions on spending at home, it is not appropriate for EU spending to increase. The president recognised the UK position and said discussions would continue ahead of the summit in November."

Roll over

In 2011 the UK's net contribution to the EU budget was £9.2bn (11.27bn euros), after the UK's rebate of £2.8bn (3.56bn euros) according to data from the European Commission. However, according to the Treasury the figure is £8.1bn.

Mr Cameron has said he has the support of the German, French, Finnish and Dutch governments to oppose any increase in the seven-year budget above the rate of inflation.

He says national governments' deep spending cuts, dictated by the scale of the debt crisis, make the case for reining in EU spending all the more compelling.

The commission, however, argues that the cuts would harm Europe's growth efforts, hitting research and small firms.

Denmark has said it will not back the budget unless it receives a rebate of more than £100m to bridge the difference between what it pays into the EU and what it gets back in return.

"Our key message to the other countries and what we are fighting for, is that we have to have a discount, and that we do not wish to pay other rich countries' discounts," Danish prime minister Helle Thorning-Schmidt said.

If there is no deal on the long-term budget, the EU's 2013 budget will roll over into 2014 with an automatic 2% rise based on inflation - still more than Mr Cameron wants.

In 2012 the EU budget was 129.1bn euros (£105bn; $168.5bn), a 1.9% increase on 2011.

The Commission says 2013 is the last year of the EU's current seven-year financial period - the time when bills for existing projects have to be paid, hence the need for a budget increase.

Outnumbered

The Commission's proposal for the long-term budget, called the Multiannual Financial Framework, sets the ceiling at just over one trillion euros, or 1.03% of EU gross national income.

Poland, Hungary and other members from the former Soviet bloc - set to benefit most from the spending plans - are opposed to any cuts.

The European Parliament could also use the power granted to it under the 2009 Lisbon Treaty to vote down any deal reached by EU governments if its calls for increased funds are ignored.

On Tuesday, MEPs voted to back a 6.8% rise in EU spending for 2013 and an overall increase of at least 5% in the EU's long-term 2014/20 budget, both of which are due to be agreed before the end of the year.

British MEPs joined forces to fight the budget plan, but were outnumbered by five to one.

The long-term budget for 2014-20 requires unanimity among the 27 member states, giving the UK a veto - but the budget for the single year 2013 is decided by qualified majority voting, meaning Britain could be over-ruled.

In a recent speech to the European Parliament, Mr Van Rompuy said agreement on the budget would not be possible without "a sense of compromise" and the political will to put aside differences.