The European Commission plan sets total spending at around 1.11 per cent of the EU's gross national income from 2021-2027 © Reuters

Brussels is seeking to increase the seven-year EU budget to approximately €1.25tn, in a bid to preserve the union’s post-Brexit spending power and boost funding for dealing with migration, defence and innovation.

The European Commission budget plan, which will be unveiled on Wednesday, sets total spending at around 1.11 per cent of EU gross national income from 2021-2027, according to officials familiar with the latest drafts. When certain off-budget items are included, that rises to 1.14 per cent.

The figures are a significant increase on the EU’s existing commitments cap of around 1 per cent. But the proposal is at the lower end of the range considered by officials planning the budget for the union’s 27 remaining member states.

The precise details are still under debate and might change after a Commission meeting on Wednesday. A Commission spokesman said on Tuesday evening that “a decision has not yet been taken”.

“It looks like it won’t be as high as expected,” said one senior EU diplomat briefed on the spending levels. Another said it was “worrying” for central and eastern European countries that disproportionately benefited from past budgets.

Once unveiled, the so-called “multiannual financial framework” will launch one of Brussels’ most hard-fought negotiations, played out against a broader east-west debate about the future of the union and the obligations of membership.

Overall the budget plan aims to reduce spending on traditional programmes such as development and agriculture, and shift funds towards new priorities such as defence, border control and the digital economy. Tighter conditions are also placed on receipt of funds, including economic reform and “values” such as rule of law.

The Commission’s opening pitch includes several measures that try to assuage the worst fears of net contributors such as Germany, the Netherlands and Sweden.

A ceiling on payments — the best guide to annual expenditure — will be set at 1.08 per cent throughout the period. Brussels has also softened its original plans to immediately scrap all “rebates” after the exit of Britain, which benefited for decades from an adjustment originally secured by Margaret Thatcher. It will now allow a five-year phase out of “corrections” for big contributors, according to officials.

Net-recipient countries face funding squeezes in other areas. Günther Oettinger, the EU’s budget commissioner, has said agricultural and so-called “cohesion and values” spending will fall by around 6 per cent.

Diplomats and officials also expect a shift of funds from east to south when detailed criteria are released, later this month.

To the alarm of Poland and Hungary, Brussels will unveil stricter “financial management” rules that allow funds to be cut off to countries where judicial independence is under threat.

Meeting some German requests, migration features as an important theme of the spending blueprint. On top of around €30bn specifically set aside for migration and border control, the integration of immigrants will be taken into account when distributing development support.

To protect the EU’s credit rating and increase its lending capacity, the commission is also proposing to increase the maximum that the union can raise from member states in a year, from 1.2 per cent to 1.29 per cent of GNI.

This buffer would help to underwrite a new “stabilisation instrument for the euro area”. This would entail cheap loans to euro-area countries hit by future economic shocks that do not require a full-blown bailout.

New dedicated funding streams will also be proposed, including a levy on the use of non-recycled plastics and a share of income generated by the union’s Emissions Trading Scheme. Such revenue-raising ideas are typically vetoed by member states.

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