David Cameron will not accept a cut in Britain's rebate from Brussels as he tries to secure a freeze in the European Union budget, Downing Street has said.
The Prime Minister's spokesman said the rebate, negotiated by Margaret Thatcher in the 1980s, was "fully justified" and would be protected.
The prospect of a reduction in the rebate has been raised by the European Commission and European Council president Herman van Rompuy under proposals for the EU budget, which will be the subject of tortuous negotiations among EU leaders gathering in Brussels on Thursday.
"We are going to protect our rebate because we think it's fully justified," said Mr Cameron's spokesman.
The Prime Minister is insisting on at least a real-terms freeze in the total EU budget for 2014-20. But he faces stiff resistance from countries which are overall winners from the way EU money is shared out - mostly poorer countries in the south and east of Europe - as well as the European Commission, which is arguing for a significant increase in its budget.
Revised proposals by Mr van Rompuy were an improvement but still contained further room for cuts, said Downing Street.
"While van Rompuy's proposals are a step in the right direction, we believe there are areas where further cuts can still be made," Mr Cameron's spokesman said. "There are various areas of spending that make up this EU budget and the current proposals see significant rises in certain areas and we think there is room to cut."
Mr van Rompuy has tabled proposals to put a ceiling of 973 billion euros (£783bn) - at 2011 values - on the amount the EU can commit to spending over the seven years between 2014 and 2020.
This would represent a real-terms reduction compared to the 993bn euro (£799bn) limit for 2007-13 and is well below the Commission's request for 1,033bn euros (£831bn) - also both at 2011 values.
However, the council president has not put a figure on the maximum amount which could actually be spent, which tends to come in rather lower than the commitment ceiling, and was 943bn euros (£759bn) over the period 2007-13.