* Conservative rebels want PM to demand EU budget cut
* Defeat on Europe in parliament would hurt Cameron
* EU leaders to seek deal in November on 2014-2020 budget
LONDON, Oct 31 (Reuters) - British Prime Minister David Cameron faced a revolt in parliament on Wednesday from members of his Conservative Party demanding in a parliamentary vote that he push for a cut in the European Union's budget next month.
Although the vote's result will be non-binding, defeat would damage Cameron by exposing enduring Conservative rifts over Europe and further undermining his authority after a punishing period for his coalition government.
Many Britons regard the EU as an incompetent, spendthrift source of bureaucracy. Britain's ties with the 27-member bloc are likely to be a big theme in a national election due in 2015.
Cameron wants the EU's long-term budget to rise only in line with inflation, while Conservative rebels say it should be cut in real terms to reflect the bleak economic landscape at home and across Europe.
"This government is taking the toughest line in these budget negotiations of any government since we joined the European Union," the prime minister told parliament. "At best we would like it cut, at worst frozen, and I'm quite prepared to use the veto if we don't get a deal that's good for Britain."
European leaders meet in Brussels on Nov. 22-23 to try to reach a deal on the budget for 2014-2020.
The vote, due to be held in the House of Commons later on Wednesday, is likely to be a close call for Cameron, whose government has a working majority of 86 in parliament.
The main opposition Labour Party will back the Conservative rebels, who claim support of at least 40 of the party's 304 lawmakers.
"We are only asking the government to strengthen its stance so that there is some real terms reduction in the EU budget," said Conservative Mark Reckless, one of the rebels behind the vote.
Cameron wants Britain to remain an EU member but to renegotiate its role within the bloc, focusing more on trade links and less on areas like regulation.
Trailing in popularity polls, Cameron faces an uncomfortable balancing act on Europe, a vexed issue that has divided his party for decades and helped to bring down former leaders, including Margaret Thatcher in 1990.
He doesn't want to alienate a majority of voters - and a powerful Conservative minority - who mistrust Europe and would probably vote to leave the EU after nearly 40 years.
The Conservative leader must also see off a threat from the fiercely anti-EU UK Independence Party, which polls suggest has around 10 percent of the vote, about the same as the pro-Europe Liberal Democrats, the junior coalition partner.
However, Cameron must also keep the Lib Dems on side and avoid wrecking relations with the EU, Britain's biggest trading partner, as the country emerges from a recession and tries to eliminate its budget deficit.
Caneron is already on the back foot after the resignation earlier this month of a senior minister who swore at police guarding his Downing Street office, and a series of missteps and U-turns since an unpopular budget was presented in March.