Britain is set to challenge a proposed hike in the EU budget which could cost Britain an extra £680 million every year.
The chancellor said the increase, put forward by EU budget commissioner Janusz Lewandowski, showed the EU needed a "reality check".
"Their proposed budget rise is completely unacceptable, especially at a time when we are asking the British people to reduce the record budget deficit and pay off the national credit card," he said.
Pressure from Britain to freeze the EU's budget was ramped up at the end of 2010 when David Cameron, together with other leading states including France and Germany, called for a budget-freeze until the end of 2013.
Now Mr Lewandowski, who insists that the move is needed to meet the costs of already made EU decisions, has called for a 4.9% increase for next year because "we have to grow".
"We cannot punish our citizens, companies, local and regional authorities who have a right to get their bills paid," he added.
Conservative MEPs have made clear they believe the EU has plenty of "fat" to cut, however.
The party's leader in the European parliament, Martin Callanan, said: "Eurocrats bizarrely seem to think that increased EU spending can offset the cuts being made by national governments.
"They are oblivious to the fact that states and taxpayers cannot afford to fund yet more Europe."
He suggested "some sort of gastric band" be fitted to prevent the Commission's enthusiasm for increasing spending.
Unusually, Labour backed the eurosceptic instincts of the Conservatives. Shadow foreign secretary Douglas Alexander called Mr Lewandowski's proposals "ill-judged and unwise".
Britain's share of the 132.7 billion euro EU budget is projected to be 12.4% in 2011, according to the Open Europe thinktank.
Director Mats Persson commented: "The Commission is either completely misreading or wilfully ignoring the public mood around Europe. There's very little appetite for a big increase to a budget that provides limited added value to citizens."