Prime Minister David Cameron was battling to reclaim authority on Thursday, after Conservative party rebels delivered his first major parliamentary defeat by defying him over the EU budget.
MPs passed a motion late Wednesday urging Cameron to insist on a real-terms cut in the European Union's trillion-euro 2014-2020 budget at a summit in Brussels next month.
While the vote is not binding, it is the most significant defeat for the Conservative-led coalition since it came to power in 2010.
Cameron had attempted to stave off a rebellion by promising to veto any above-inflation increase of the EU budget, which has become increasingly contentious as austerity measures bite across the continent.
He insists that a seven-year EU budget freeze in real terms is the best Britain can realistically expect next month, as most of the bloc's 27 member states support a budget increase.
But in a humiliating blow to his authority, 53 Conservative MPs defied the prime minister and voted for a budget cut.
After heated debate in the House of Commons, the vote passed by 307 votes to 294, to loud cheers from the rebels.
The Telegraph described the defeat as a "Halloween horror" for Cameron, while the i newspaper summed the situation up as: "Nightmare on Downing Street".
Deputy Prime Minister Nick Clegg said there was "absolutely no hope" of a real-terms cut in EU spending.
"The coalition government's position remains the same -- we will not accept an increase, above inflation, to the EU budget," he was due to say in a speech at the Chatham House think-tank on Thursday.
"That is the toughest position of any European country," the draft speech added.
Clegg, like Cameron, warns that if a seven-year deal is not struck next month the EU will have to revert to annual budgets, which they say would be more costly for Britain.
"The Prime Minister and I may have our differences on Europe, but on this we are absolutely united," said Clegg, a former Member of the European Parliament whose party is more pro-EU than the Conservatives.
But ministers face a battle to get any EU budget deal approved by parliament. Mark Reckless, a leading Conservative rebel, said Cameron could not afford to return from Brussels with anything less than a real-terms budget cut.
"If the government comes with anything except a cut in the EU budget then they are not going to be able to get that through parliament -- and they are going to need to get it through parliament in this case," Reckless told BBC television.
The European Commission, the EU's executive arm, wants a budget of 1.03 trillion euros for 2014-2020, up 5.0 percent on 2007-2013, but seven major contributor states have balked at the increase at a time when they are having to cut spending at home.
It rejected on Tuesday a 50-billion-euro cut suggested by Cyprus, the current holder of the EU's rotating presidency.
But Germany and France have joined Britain in insisting that the EU cannot expect to get more when national governments have to make do with less, demanding cuts in the 2014-2020 budget of 100 billion euros or more.
Wednesday's parliamentary revolt puts renewed pressure on Cameron after months of blunders and U-turns by the coalition, which is halfway through its five-year term, and whisperings of a possible leadership challenge.
He is not the first Conservative PM to be haunted by Europe, an issue that has bitterly divided the party for decades.
Infighting over the bloc plagued the leadership of John Major, and was central to the downfall of Major's predecessor Margaret Thatcher.
Europe is also likely to be an issue in the next general election, scheduled for 2015, amid growing scepticism about the EU among British voters.
Many Conservatives have called for a referendum on ending Britain's membership of the bloc altogether. Cameron opposes an "in-out" referendum, but has hinted at a public vote on adjusting Britain's relationship with the EU.
Cameron warned European Council president Herman van Rompuy at talks in London last week that Britain, which does not use the euro currency, could not support a sharp increase in the EU budget.
In December, Cameron dramatically parted ways with the bloc over the EU fiscal compact, which laid down the lines for tighter coordination of tax and spending policy amid the eurozone crisis.