THE British Prime Minister suffered a humiliating defeat in the Commons tonight as the issue of Europe again split the Conservative Party.
MPs voted by 307 votes to 294, majority 13, in favour of a rebel Tory call for a real-terms cut in the European Union's budget.
It is the first significant defeat in the Commons for the Government and came despite David Cameron's insistence that he was taking a tough stance over the budget negotiations.
The Prime Minister said he would veto any real-terms rise in the 2014/20 multi-annual financial framework.
"At best we would like it cut, at worst frozen, and I'm quite prepared to use the veto if we don't get a deal which is good for Britain," he said.
Treasury minister Greg Clark pleaded with MPs to support the Prime Minister as he went to Europe to "bat for Britain" over the seven-year spending plan.
But Labour MPs lined up behind the Tory rebels in calling for the Government to support nothing less than a real-terms cut in the budget.
The result of the vote is not binding on the Government but is a major embarrassment for ministers.
Mr Miliband accused him of "throwing in the towel" over a cut before the negotiations had even begun.
"He is weak abroad, he is weak at home. It's John Major all over again," the Labour leader said.
Mr Cameron said the Leader of the Opposition was "playing politics, not serving the country".