The Chancellor George Osborne has said that "everyone wants to see a reduction in the EU budget" but that there was disagreement in parliament over how to achieve this.
Nick Clegg has accused the Labour leadership of behaving in a dishonest and hypocritical way after they combined with Tory rebels to inflict a damaging defeat on the coalition.
Daybreak's Sue Jameson reports.
Conservative MP Peter Bone told Daybreak that he believes MPs have actually strengthened the Prime Minister's position by voting against the increase in the EU Budget.
He said: "Parliament spoke for the people. It was just a no brainer that the EU budget has to be cut".
Former Conservative cabinet minister Michael Portillo has told Daybreak that David Cameron was dealt a 'major blow' as Tory rebels combined with Labour to inflict a brusing defeat on his EU negotiating strategy.
Nick Clegg will insist in a speech today that, with the majority of the 27 member states net recipients from the EU budget, he and David Cameron were "absolutely united" in the view that the best strategy for Britain was for a real-terms freeze, with the budget continuing to rise with inflation.
The Deputy Prime Minister will say that under the proposals backed by Labour, failure to reach agreement next month in Brussels would mean the reversion to one-year budgets which would be even more costly to the UK.
Their change of heart is dishonest, it's hypocritical. And worst of all, Labour's plan would cost the taxpayer more, not less," he is expected to say.
Because in pushing a completely unrealistic position on the EU budget - one that is miles away from any other country's position - Labour would have absolutely no hope of getting a budget deal agreed.
We've been waiting for years for the Labour Party to finally announce how they would cut spending.
Now they have finally come out in favour of cuts but in a way they know is undeliverable; and in a way that would hurt British taxpayers. And it turns out even their cuts cost money.
I've heard people describe it as clever opposition politics - and I suppose it is. But it's not the behaviour of a party serious about government.
Deputy Prime Minister Nick Clegg has warned Tory rebels who combined with Labour to inflict a damaging defeat on the coalition that they have "absolutely no hope" of achieving their goal of forcing the European Union (EU) to cut spending.
Fifty-three Conservative MPs - including two tellers - last night defied the whips and joined Labour in supporting a rebel Commons amendment demanding ministers seek a real-terms cut in the next seven-year EU budget for 2014-20.
The announcement of the 307 to 294 vote defeat for the coalition - its first of significance since assuming power in 2010 - was greeted with loud cheers by Eurosceptics on the Tory benches.
However, a furious Mr Clegg has turned his fire on Labour, angrily accusing them of a "dishonest" and "hypocritical" change of policy for short-term political advantage.
In a speech to be delivered to the Chatham House international affairs think-tank - not normally the scene for such nakedly partisan political attacks - he will say that Labour was well aware there was "absolutely no prospect" of achieving a real-terms cut.
Foreign Secretary William Hague said ministers would "hear and take notice" of what Parliament had said but indicated that the Government would not change its negotiating position.
He told the BBC:
– William Hague MP
We are already going for the toughest position any Prime Minister has ever gone for in EU budget negotiations. He will continue to seek the best possible deal for the British taxpayer.
That was what was never done by a Labour Party that never sought a freeze, never asked for a freeze, never secured a freeze for the British taxpayer.
Shadow Financial Secretary to the Treasury, Chris Leslie, has said the Government's EU budget vote defeat is "humiliating" for the Prime Minister.
Mr Leslie told ITV News: "He couldn't even convince his own backbenchers to vote for a real-terms reduction in the EU budget".
Conservative MP, Mark Reckless, who put forward the amendment to the EU budget motion which led to the coalition Government's Commons defeat, has said it is "a victory for parliament".
He told ITV News: "I thought we were more likely to win than lose and I think it's a victory for parliament. Parliament has spoken on behalf of the people.".
He added: "We're taking power away from the Whitehall and EU elite who have run this country for too long".