Council President Herman Van Rompuy on 15 November tabled a €973-billion compromise proposal, €75 billion less than the Commission's initial recommendation for the 2014-2020 budget.
“While Van Rompuy's proposals are a step in the right direction, we believe there are still areas where further cuts can be made,” Cameron's spokesman said on the eve of the summit (21 November).
“The Van Rompuy proposal represents the talks starting to go in the right direction, we think that the level still needs to come down appreciably,” an EU diplomat added.
The diplomat said that the UK position is not about reducing actual expenditure, but about spending more efficiently. He added that EU administrative costs could still be reduced.
UK will offer newer member states a payment guarantee
Cameron will be working for an agreement at the summit, the source said, whilst reiterating that the UK will not accept the loss of its rebate.
“We think it [the rebate] is justified. It tries to rectify the low net receipts and that is what justifies those low receipts, and so it is a red line we have made that is clear to people,” said the diplomat.
Discussing concerns that proposals to freeze the budget will hurt newer member states through lost cohesion funds, the diplomat said that Britain was prepared to give a “payment guarantee” to those states.
Such a guarantee would ensure that spending levels under the next budget are preserved at the 2007-2013 rate, even if the overall budget is frozen.
Cameron has spoken to a number of EU leaders on the budget – including Angela Merkel, François Hollande, Mark Rutte, Fredrik Reinfeldt and Donald Tusk – by phone over the past week.
Summit represents another challenge for UK-EU relations
“There is a real prospect of agreement” at the summit, said another diplomatic source, but he added: “Cameron is prepared to say no, and I do not believe he is the only one prepared to say no. He has done it before.”
The sources acknowledged that the summit could represent another watershed moment in the UK’s worsening relationship with its EU partners.
The UK Parliament and press have both given a resounding signal that the British believe that any rise in the EU budget will be viewed as deeply inequitable, one said.
“Across the EU people are facing difficult choices. We are all facing stress and uncertainty and the EU is changing in reaction to the crisis,” said one diplomat.
Cameron does not have much room for manoeuvre in the negotiations, since the UK Parliament has already voted for a freeze in the EU budget.
The right wing of Cameron’s Conservative party is demanding a cut to the EU budget, whilst many believe that both Conservative and Labour parties might offer a referendum on Britain’s EU membership before the next general election, to be held in 2014.
With rumours that the other member states are feeling for ways to circumvent the UK veto, and Germany's Merkel increasing exasperated with British intransigence, the summit has the potential to worsen the UK’s already fraying relationship with the EU.
Germany, which has proposed a budget cut harsher than Van Rompuy’s, may represent Cameron’s only chance of a lifeline if EU leaders hope to agree the budget at this sitting, rather than delaying a budget deal until next year.