After the usual midnight haggling, EU leaders agreed the next seven-year EU budget on Saturday morning, with both the UK and Germany giving up money which will go towards development support in the 10 new member states, including Cyprus and Malta. The UK finally agreed to surrender EUR10.5bn of its budget rebate over the seven years, up from an original EUR8bn, in return for a concession by France that the Common Agricultural Policy will be part of a spending review in 2008-2009.

At present, the EU budget is funded through a combination of import duties, value added tax revenues and direct contributions from member states. However, speaking two days after the EU budget was agreed, Barroso said that the time has come for a complete review of the budget.

“We have to find a way of avoiding such a direct link between national budgets and the European budget,” Barroso said.

“We have to think about some reform of the resources of the EU...We should look at a system...that would go beyond negotiations between countries," he added.

The Commission is set to review the European budget by 2008/9 and Barroso indicated that no options will be left off the table in its attempt to streamline the process. “We are going to look at it without taboos,” he stated.

One of these options is likely to be a proposal for an EU tax, an idea supported by the EU's Christian Democrat leaders including Wolfgang Schussel, Austrian chancellor, Edmund Stoiber, Bavaria’s chancellor, and Nicolas Sarkozy, leader of France’s centre-right UMP.

However, such a proposal is likely to be fiercely opposed by a number of member states, including the United Kingdom, Ireland the Czech Republic, Estonia and Slovakia, which would all have the power to veto the measure.