David Cameron to renew call for freeze in spending by the European Union

David Cameron is to renew his call for a freeze in spending by the European Union when he holds crunch talks with Angela Merkel, the German Chancellor, in Downing Street.

The Prime Minister will be under pressure from two sides. Mrs Merkel will urge him to allow a small real terms rise in the EU’s budget for 2014-20 and not to wield the British veto at a Brussels summit in two weeks. But his plan for a freeze will disappoint the 53 rebel Conservative MPs who defeated the Government last week when they demanded a cut in EU spending.

In the Commons, 23 Tory Eurosceptics challenged Mr Cameron’s authority again by calling on him to veto proposals to forge a banking union among the 17 countries in the eurozone. The Government backs the idea as part of a plan to resolve the euro crisis but the Tory MPs fear it will damage the City of London by boosting the rival financial centres in Paris and Frankfurt.

Bill Cash, Tory chairman of the cross-party EU Scrutiny Committee, expressed concern that the UK could be outvoted by the 17-nation bloc on the European Banking Authority. “That would be singularly bad news for the City of London,” he said.

Andrea Leadsom, a Tory member of the Treasury Select Committee, said banking union would have “a much more profound effect” on the UK than the EU budget row.

Some 23 Tory Eurosceptics signed a rebel amendment opposing a Commons motion to approve banking union. But they had little chance of defeating the Government because, unlike last week, the Labour Opposition will not join forces with them.

Speaking ahead of his working dinner with the German Chancellor, Mr Cameron’s official spokesman said: “We approach these negotiations [on the EU budget] looking to get an agreement but it must be the right deal for the UK.”