EU to fine UK if it doesn't pay budget bill

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The U.K. could be handed a £42 million ($67 million) fine next month if it does not pay a £1.7 billion bill demanded by the European Union.

The EU said on Monday it will fine Britain if it refuses to pay a £1.7 billion bill demanded by Brussels by December 1. On Monday, a spokesman for the European Commission insisted the U.K. had to follow legal procedures and said the December 1 deadline was binding.

"Everybody has to pay what is due," Margaritis Schinas, spokesman for the new commission chief Jean-Claude Juncker, said on Monday. "If fines are not paid by 1 December there is a process of interest being accumulated,"Schinas added, according to various media reports

The EU's new budget spokesman, Jakub Adamowicz, is also reported to have warned that the U.K. would have to pay 2.5 percent interest on the debt if it is not paid in time, with the rate going up by 0.25 percent each month the debt remains. For the U.K., that would mean a £42.5 million fine if it does not pay in December and just over £90 million by the end of 2015.

The European Commission, the executive arm of the EU, made its initial demand in October after reviewing the economic performance of each of the EU's 28 member states since 1995.

Its new calculation showed that the U.K. has grown more than previously thought over recent years and so it has asked it to contribute £1.7 million more to the budget.

Read more: UK in a corner over EU budget bill

As could be expected, however, the demand has caused a furore among the British political establishment and has alienated the British public further from their European neighbors.

U.K. Prime Minister David Cameron has so far refused to pay the bill, which he called a "growth tax", by the deadline. On Monday, Chancellor George Osborne told the BBC's "Newsnight" program that the EU was "not working economically for Britain" at the moment.

Read more: Britain's GDP growthslows in third quarter

Osborne is expected to urge his fellow EU finance ministers to reduce and delay the bill when they meet in Brussels on Friday. Italy, which currently holds the EU's rotating presidency and which has also been asked to pay a surcharge to the EU, is apparently keen to reach a compromise to end the impasse. An Italian government source has been widely quoted in media reports as stating, 'This is not the end of the story. There is a widespread willingness to find a solution to this issue.'

-By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt.