Cameron looks to rally Tories as Osborne rules out 'mansion tax' called for by Lib Dems

David Cameron today sought to rally restive Tories with a pledge to use Britain's veto to block the European Union budget if it is not in the UK interest.

As the Conservative Party conference opened in Birmingham, the Prime Minister said he would not stand for "outrageous" attempts to increase the overall EU budget in forthcoming negotiations on spending for the period 2014 to 2020.

"If it comes to saying 'no' to a deal that isn't right for Britain, I'll say 'no'," he said in an interview with The Sunday Telegraph.

He also proposed a "bold thinking" plan for the EU to have separate budgets - one for the 17 eurozone nations and another for the 10 - including Britain - outside the single currency.

Meanwhile Chancellor George Osborne has finally ruled out a "mansion tax" called for by the Liberal Democrats.

The twin moves are likely to prove highly popular with Conservative MPs - particularly on the party right - but will heighten tensions with their coalition partners.

The Lib Dems reacted with dismay when Mr Cameron used the veto to oppose the EU fiscal pact last December, and they have continued to lobby Mr Osborne to adopt their plan for an annual levy on homes worth more than £2 million which they first proposed in opposition.

However Mr Osborne said that he was not prepared to accept a tax which "clobbered" people who had worked hard and saved to buy their home.

"We are not going to have a mansion tax or a new tax that is a percentage value of people's properties," he told The Mail on Sunday.

"Before the election they will call it a mansion tax, but people will wake up the day after the election and discover suddenly their more modest home has been labelled a mansion.

"We don't think people who have worked hard, saved up to buy a home, should be clobbered with a mansion tax."

Instead, he said the Government would be extending the council tax freeze for a third year in a row while rises in regulated rail fares would be capped at retail price inflation (RPI) plus 1%.

In a further overture to the right, Home Secretary Theresa May called for a review of the EU's freedom of movement directive in order to prevent a new influx of immigrants from the continent.

"We are looking at this whole area of the abuse of the freedom of movement. But we will go further on this, and the issue of free movement will be part of the review," she told The Sunday Times.

"It will be looking at where the decision-making powers are between the EU and the UK, how they are operating and what the impact of those are."

At the start of what could be a tricky week - with the Tories continuing to trail in the polls and the economy mired in recession - Mr Cameron acknowledged that he needed to do more to explain to voters what the party was going in government.

"You spend a lot of time governing and deciding, and you don't spend enough time explaining. And I think conference week is a real opportunity to get out there and explain," he said.

He insisted that he was not ready to concede the political centre ground to Ed Miliband after the Labour leader's party conference speech claiming his was the true "One Nation" party.

"Are the Conservatives deserting the common ground of British politics? Absolutely not," he said.

He attacked Mr Miliband for "signalling right but turning left" and poured cold water on his much trumpeted feat of speaking for more than an hour without a text.

"It is difficult to give a speech without notes for 70 minutes. It's even more difficult when you haven't got anything to say," he said.

He also sought to play down the potential threat to his leadership from Boris Johnson whose popularity soared over the summer with the success of the Olympics.

Despite a series of attacks by the London mayor - most notably over the expansion of airport capacity in the South east - Mr Cameron insisted he was he is "relaxed about the blond-haired mop sounding off from time to time".

He added: "He will always speak his mind. There is no point in trying to contain Boris."

Mr Cameron did however risk provoking his MPs on one issue with a hint that he would continue to protect fence Britain's overseas aid budget after the next general election in 2015.

"Once you've kept your promise you need to keep on keeping it," he said.

Speaking in reference to the council tax freeze and train fare cap, Mr Cameron said the Government was "straining every sinew" to help hard working people.

He told The Sun: "Our focus is on people who work hard, who want to do the best for their families, who aren't well off and want things to improve."

PA