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Timing is everything, or so often it seems in politics. In Strasbourg, members of the European Parliament met to vote on the EU's budget for 2011.

At almost the same hour British voters were learning of the severest cuts to services since World War II.

A thousand miles from Strasbourg, Portuguese MPs were wrestling with their own budget and the inevitable cuts that must come.

And 1,300 miles from where the MEPs were debating, Irish voters were being told that more would have to be squeezed out of hard-pressed taxpayers. Public sector workers, who have seen their wages cut, know that more bad news is on the way. When I was in Dublin two weeks ago the atmosphere was grim.

The mood in Strasbourg, however, was very different. They agreed to increase the EU budget by 5.9% - almost the same level as proposed by the Commission. There were 92 MEPs who voted in favour of freezing the budget, but 564 supported an increase.

British ministers called it "outrageous". One senior diplomat in Brussels called the decision "nuts". Today one British Liberal Democrat MEP, Chris Davies, said it was plain barmy for the EU to be demanding extra contributions from member countries. David Cameron told the House of Commons in London: "We've called for a cash freeze in the size of the EU budget for 2011 and we're working very hard to make the case across Europe."

Quite a number of countries take the British view, although a majority would settle for an increase of 2.9%. There will now be an attempt to reach a compromise between the Council and the Parliament. If no deal is reached, then the 2010 budget continues. That is favoured by the British, who believe it would be in tune with the spirit of the times.

The President of the European Parliament, Jerzy Buzek, defended today's decision. He said: "Cuts cannot be simply populist measures limiting many possibilities - for example, for education, training or research." The Parliament rejected what it called "arbitrary reductions in commitment appropriations... that jeopardise the implementation of Union policies and programmes already agreed".

Of course, the definition of cuts is to reduce or trim commitments already made. Others pointed out that under the EU was building new institutions, like a diplomatic service, that had to be financed.

There is no scaling back the cost of running the EU's institutions, which account for 5.7% of the budget.

Scottish National Party MEP Alyn Smith, who voted to freeze the budget, said: "Freezing the budget for next year would indeed be inconvenient for a number of projects, but some projects could do with a bit of harder analysis."

Now the majority mood in the European Parliament is to avoid wrangles over the budget with member states in the future. The plan of the four largest political groups is to give the EU more budgetary autonomy, with an independent source of income. Raising EU-wide direct taxes will be hugely controversial with member states, and several have already voiced their opposition. But it is now firmly on the Parliament's wish list.

Power usually follows the money. If the European Parliament was to get its way it would greatly enhance its influence and reduce that of the member states. Tax is one of the most sensitive issues for voters and as this argument gathers pace it will be interesting to discover whether Europe's voters back EU-wide direct taxes.

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