Labour joins Conservative attack on EU&#39;s ?1tn budget proposal

Ed Balls condemns European commission's plan as 'out of touch' amid EU-wide spending cuts

Britain's political class closed ranks to condemn the European commission's proposal for the first ?1tn EU budget.

In a rare display of unity, Labour echoed No 10's claim that the EU budget for the seven years from 2014 was inappropriate during a period of austerity. Ed Balls, the shadow chancellor who played a key role in thwarting Tony Blair's attempts to join the euro, called for a rethink.

Balls said: "When countries across the EU are having to make tough decisions to get their deficits down after the global financial crisis, these proposals are ill-judged, out of touch and cannot be supported. The European commission should go back to the drawing board."

Douglas Alexander, the shadow foreign secretary, said: "At a time when Britain and other countries have to make some tough decisions on public spending this significant rise proposed by the EU commission will strike people as inappropriate and misguided. The European commission should be focused on finding savings and targeting spending on the most crucial areas."

The Labour leadership criticised the proposed EU budget after the commission called for a new tax on bank transactions. Jos� Manuel Barroso, the commission president, wants a larger share of its spending to be supplied by "own resources" ? taxes paid to Brussels.

The commission also wants an overall budget of ?971.5bn (�872bn) in payments and ?1.025bn in commitments for 2014-20, but denies British claims that this amounts to a 10% increase. The Treasury says the commission is wrong because it uses commitments, rather than actual spending, as the baseline.

Stephen Booth, research director of Open Europe, said: "Although it has proposed some minor improvements, such as a reduction in farm subsidies and a new fund to promote energy and infrastructure connections, the European commission has again opted for an above-inflation increase without the radical reform needed to make the EU budget more rational and on target.

"The European commission has also chosen to employ some creative accounting by moving some spending items off its main balance sheet, to hide the true rise in overall expenditure. This type of spin will not win the trust of taxpayers and citizens across Europe."

The comments came as Nick Clegg was pressed by senior Liberal Democrats to join the Lords rebellion against the government's European Union bill aimed at halting any further integration of Britain into the EU by triggering referendums on any transfers of powers to Brussels.

A letter to the deputy prime minister from Andrew Duff, the leading Lib Dem MEP who believes that passage of the bill could ultimately lead to Britain leaving the EU, argues that the use of referendums destabilises Europe, that the EU is "slithering towards a fiscal union" which will have a big impact on the UK while leaving it marginalised, and that the bill reduces parliament to an onlooker in EU policy-making.

The letter to Clegg has been sent to all Lib Dem MPs, peers, and MEPs in an attempt to block or delay the Tory-led campaign to insulate Britain from forfeiting more sovereign powers to Brussels.

The bill was the Cameron government's response to Gordon Brown's refusal to stage a referendum on the EU's Lisbon Treaty.

Earlier this month senior Thatcher-era Tories such as Michael Heseltine and Leon Brittan as well as and veteran Lib Dems led by Lady Williams rebelled in the Lords against the EU bill, larding it with amendments before sending it back to the Commons where the government is expected to overrule the upper house.

The Duff letter, of which the Guardian has a copy, will enrage the eurosceptic Tory backbenches. "I urge you to argue in Cabinet for acceptance of the Lords' amendments," Duff told Clegg.

The bill is tantamount to a "unilateral renegotiation of Britain's terms of EU membership. A wise government would avoid doing such irreparable damage to the national and European interest."

The effect of the bill is to treat the EU uniquely in British politics, singling out EU matters "for a popular vote and the relegation of the Westminster parliament to the role of onlooker", Duff contends.

The rest of the 27 countries of the EU, he adds, take a dim view of the Cameron government's move and will simply bypass Britain on key policy-making decisions.

"Everyone else in the EU knows that, and rightly concludes that the UK's credibility as a negotiating partner is dramatically lowered ... the UK will be excluded from key sectors of integration.

"I cannot see how the UK will have either the moral or political clout to block the constitutional evolution of the EU desired by its partners. Relegation to a new class of second-class membership would be the only available step. Such marginalisation would delight many Conservatives and Europhobes. It is a prospect which must appal us."

Nicholas Watt

Ian Traynor

guardian.co.uk © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds