David Cameron is facing a fresh mutiny over Europe after Tory backbenchers and Labour demanded a real-terms cut in the EU budget.
The Prime Minister has been fighting proposals from the European Commission that would see a 5% hike over the next seven years.
Instead, he wants spending to rise only in line with inflation - currently around 2%.
But Mr Cameron is set to come under intense pressure from his own side and the Opposition on Wednesday when the Commons debates the government negotiating strategy for next month's crunch EU summit.
Conservative MPs Mark Reckless and Mark Pritchard are tabling an amendment insisting that any budget rises should be below inflation.
Senior backbenchers John Redwood and Bill Cash are also believed to be among those backing the text.
Mr Pritchard, who played a prominent role when 81 rebels voted for a referendum on Europe last year, said Mr Cameron should be ready to show "real fiscal leadership" and wield the veto.
"At a time of fiscal restraint for both families in the UK and families throughout the EU, it is unacceptable that there should be any increase in the EU budget," he said.
"The EU is a wasteful and profligate entity which needs to find savings rather than new ways to spend UK taxpayers' money.
"The Prime Minister needs to show real fiscal leadership on this issue and be prepared to exercise his veto if the EU do not listen."
Writing on his blog this morning, Mr Reckless insisted the suggestion in the amendment was not "excessively radical".
"Although many of us would wish to see a substantial reduction in EU spending, at least in line with cuts at home, today we are only asking the Government to strengthen its stance so that there is some real-terms reduction in the EU budget," he said.
"Some real-terms reduction is surely not an unachievable or excessively radical goal, given the extent to which we and other EU countries are making less palatable cuts at home.
"Parliament must also set the negotiating position because any budget settlement will require us to pass primary legislation."
Shadow chancellor Ed Balls and shadow foreign secretary Douglas Alexander used an article in The Times today to say that, like the governments of its 27 member states, the EU should accept that it must cut spending in the current austere economic conditions.
"The crisis in the eurozone and a chronic lack of growth across the continent mean that EU resources are stretched and priorities must be revised," they wrote.
"The challenge for the EU, as for national governments, is to cut spending in a way that is both fair and supports rather than stifles jobs and growth.
"That is why the priority for the new seven-year budget must be to promote growth and jobs across Europe.
"And that is why Labour will argue against the proposed increase in EU spending and instead support a real-terms cut in the budget. We believe these goals are difficult but achievable with the right leadership and the right approach from the UK."
Mr Balls and Mr Alexander called for savings from the Common Agricultural Policy and from more effective use of the EU's structural funds to support disadvantaged areas of the continent.
They said that an independent EU auditor should be appointed to review every aspect of spending for its impact on promoting growth in member states.
But they said that Mr Cameron was not in a position to deliver the best outcomes for the UK.
"The real tragedy for Britain is that at the very time when our leadership is most needed, the UK's influence has rarely been so marginalised," said the Labour pair.
"As a result of David Cameron's behaviour, those we used to call friends now ridicule the Prime Minister in meetings, shut him out of negotiations and bad-mouth him to the press."
However, Labour leader Ed Miliband sidestepped questions about whether he would vote against the Government on Wednesday.
"We will look at anything that comes forward in terms of votes," he said during a question-and-answer session after a speech about mental health today.
Asked whether he was now a Eurosceptic, he said: "No."
Downing Street insisted the Government was already taking a tough line on the budget - suggesting it would be unrealistic to expect more.
"There simply isn't the case for a real-terms increase. We think the Commission's proposal for a real-terms increase is completely unrealistic," a Number 10 spokeswoman said.
"We are going to be sticking to our guns," she said. "When European countries are having to tighten their belts at home, that is really important."
Asked why the Government was not pressing for a real-terms cut, the spokeswoman replied: "We are one member among 27."
If no agreement is reached on the multi-year budget, next year's allocation will automatically increase by 2% in line with inflation.