BRUSSELS (AFP) - British Prime Minister David Cameron appeared to have won his battle for austerity in Brussels on Friday after European Union leaders looked set to cut the bloc's budget for the first time ever.

Mr Cameron had vowed to accept nothing less than a freeze or a cut in EU spending and proposals put to all-night talks suggested the budget would be cut by three percent. Aides cautioned that a lot of work still needed to be done even if the British press was already describing the talks as a glorious success for Mr Cameron, under pressure from growing eurosceptism at home.

The prime minister had laid his cards on the table as soon as he arrived at the summit on Thursday, insisting the European Union was not immune to the belt-tightening measures being imposed across the continent.

But critics had warned he had left himself with few allies following his veto of a crucial eurozone deal in 2011, his budget demands that caused the last summit in November to collapse, and last month's pledge to hold a referendum on Britain's membership of the EU. The pledge succeeded in calming eurosceptic aspects in his Conservative party but it sparked concerns in many European capitals by putting the prospect of a British exit on the table for the first time.

The proposals submitted by EU president and summit chair Herman Van Rompuy just before dawn on Friday include budget commitments worth 960 billion euros (S$1.6 trillion), with 908.4 billion euros due in payments.

This is a significant reduction from the 973 billion euros in commitments Van Rompuy offered during November's summit, itself a reduction from an original budget of more than a trillion euros.

The deal is likely to be welcomed by members of Mr Cameron's Tory party. The Daily Telegraph newspaper proclaimed the deal on its website as a "victory for David Cameron as EU budget is cut for first time in its history."

The prime minister's determination to slash the budget was driven as much by domestic financial concerns - Britain is teetering on the edge of a triple-dip recession - as by the need to address public disquiet over the country's future in the EU.

In his speech on January 23 setting out his promise for a referendum, Mr Cameron said he believed Britain should play an active role in the EU but that the bloc must reform, particularly in reining in its bloated bureaucracy.

However, Nigel Farage, a member of the European Parliament and leader of the UK Independence Party (UKIP), said the agreement was unlikely to quell the growing anti-European sentiment in Britain.

"From Cameron's perspective, he would argue that this his the best deal he could have possibly got," Mr Farage told AFP, but said many people wanted to stop sending money to Europe altogether.

"The argument in Britain now is about 'in' or 'out', it's not about shaving a few pennies off," he said.

Mr Cameron's stance had put him on a collision course with countries such as France who wanted EU investment to boost growth and tackle unemployment.

The tensions were laid bare when French President Francois Hollande pulled out of a pre-summit meeting with Mr Cameron on Thursday, although officials insisted it was a scheduling problem, not a snub.

The British leader had also courted support from Denmark, Sweden and the Netherlands, which like Britain pay more into the EU than they get out.