“I want a cut in the EU budget, David Cameron wants a cut, pretty much every Conservative wants a cut,” Osborne told the BBC.
But he warned: “We’ve not just got to get this past the House of Commons, there are also 26 other European countries who have also got vetoes.”
He suggested the government’s proposed two per cent rise – in-line with inflation – is a more realistic negotiating position.
On Wednesday night Conservative rebels joined with the Labour party to defeat the government by 307 to 294. The rebel’s non-binding amendment calls on David Cameron to demand a reduction in EU spending plans for 2014-2020.
The European Commission wants a five per cent increase.
Meanwhile Deputy Prime Minister Nick Clegg hinted he would fight Conservative plans to repatriate certain EU powers on law and order from Brussels.
“A grand, unilateral repatriation of powers might sound appealing but in reality, it is a false promise, wrapped in a Union Jack,” he said in a speech at Chatham House.
He also said it would be wrong to leave the EU but seek to stay in the single market, similar to the model used by Norway and Switzerland: “These countries sit and wait for bills and directives from Brussels...with absolutely no say over Europe’s rules.”