UPDATE 1-UK's Cameron tells Europe: I can veto EU budget

(Adds quotes, details) By Matt Falloon

BIRMINGHAM, England, Oct 7 (Reuters) - British Prime Minister David Cameron on Sunday threatened to scupper European Union budget talks unless other members of the 27-nation bloc agree to "proper control" of spending, without specifying what would be an acceptable settlement for Britain.

Cameron also lent his support to a proposal for two EU budgets, one for the euro zone and another for cash-strapped Britain and the nations outside the single currency, but said it would take some time to come to fruition.

The prime minister used Britain's veto in December to block an EU-wide pact designed to help the euro zone, a move that delighted the anti-EU wing of his Conservative Party but dismayed his Liberal Democrat coalition partners and other European leaders, who eventually agreed a deal without Britain.

"People in Europe know I mean what I say. I sat round that table - 27 countries, 26 of them signing up to a treaty - and I said this is not in Britain's interest. I don't care how much pressure you put on. I'm not signing," he told the BBC.

"They know I'm capable of saying no ... and if I don't get a good deal, I'll say no again ... If we cannot get a deal that has proper control of that budget, if they put forward ideas for massive increases, I won't say yes to it."

European leaders will debate the EU budget for the 2014-2020 period in the coming months. In 2010, Cameron tried to get the EU to cut or freeze its 2011 budget but had to settle for a modest increase to howls of disapproval at home.

The prime minister is under pressure to take a tough line with Brussels to pacify "eurosceptics" in his party who fear the Conservatives will lose votes to the increasingly popular anti-European UK Independence Party at the 2015 election.

One of his newly-promoted cabinet ministers recently called for more "EU veto moments". Europe has divided the centre-right Conservatives for decades and helped to bring down the last two of the party's prime ministers, Margaret Thatcher and John Major.

Cameron says he wants Britain to remain part of the EU - Britain's biggest trading partner - but has pledged to avoid getting entangled in costly solutions to the euro zone debt crisis and to try to claw back powers from Brussels.

He has promised a referendum after 2015 on any future EU treaty, but some Conservatives want Britain to renegotiate its relationship with Europe now, disappointed by Cameron's u-turn on a pre-election pledge for a plebiscite on the Lisbon Treaty.

"I'm not happy with the status quo, so I don't want to have to say yes to the status quo," Cameron said. "But I also don't think it would be right to leave right now because we would be basically coming out of the single market which our businesses badly need to keep those markets open."

One area where Cameron could push harder is the issue of European immigration - a topic by which British political parties often gain votes by taking a tough stance.

"Two weeks ago, I visited two factories in a week, and I asked the question how many people do you employ from other EU countries, what's the balance? In one, it was 60 percent; in the other it was 50 percent," he said. "Now, heaven's above, we have got so many unemployed people in our country."

(Editing by Mark Potter)