European Commission proposes EU budget rise of 5%

The European Commission is also proposing a change in the way the EU gets its money

The European Union could increase its budget by 5% under a controversial proposal unveiled by its executive, the European Commission.

The proposal - for the period 2014 to 2020 - comes despite calls from some EU member states for a budget freeze.

The commission is also looking to review budget rebates that some member states get - most notably the UK.

Hours after the proposal was unveiled, a UK government spokesman branded the planned budget "unrealistic".

"Britain and the EU's other largest payers made clear in December that the EU budget should be frozen, and we will stick to that," the Downing Street spokesman said.

"The EU has to take the same tough measures as national governments are taking across Europe to tackle public deficits. That means a restrained EU budget focused on the things that will get our economy growing."

The above-inflation increase proposed by the commission has also been criticised by France, Germany and the Netherlands. They and the UK want the budget capped at the EU inflation rate, currently 3.2%.

Hard bargaining ahead

Negotiations over the proposal are expected to run well into next year.

EU spending is negotiated in seven-year cycles and the commission's plans would set the 2014-2020 EU budget at one trillion euros ($1.48tn; £898bn).

Under the plans, about 376bn euros would go to boosting underdeveloped areas of the EU and another 372bn euros to support Europe's farmers.

"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," said European Commission President Jose Manuel Barroso.

The UK has received billions of pounds in EU rebates for more than 25 years. The justification was that, despite being a big net contributor to the budget, the UK got a relatively small share of EU farm subsidies. In 2011 the UK rebate will be about 3bn euros.

Mr Barroso warned: "There is no room for thinking about getting your fair share of your money back. The time has come to reform the system of rebates. It is of the utmost complexity."

In addition to the budget, the commission is looking to change the way in which the EU gets its money - including EU-wide VAT and a tax on financial transactions.

In the commission's view, for too long the budget has been plagued by arguments over the different national contributions and it is time for the EU to boost its own sources of revenue.

Correspondents say EU-scepticism has increased in member states in the face of expensive bail-outs for struggling euro countries like Greece, the Republic of Ireland and Portugal - even though those packages are not funded through the EU budget.