Nick Clegg has opened up a new front on the EU by launching one of his strongest attacks on David Cameron's plan to use the eurozone crisis to repatriate powers to Britain.

A day after the coalition parties joined forces to denounce the Labour party for demanding a real-terms cut in the EU budget, Clegg described Cameron's plans to repatriate powers as a "false promise wrapped in a union jack".

The deputy prime minister also made clear that he is spoiling for a more immediate fight with the prime minister over plans to opt out of around 130 EU law-and-order measures and then to opt back into a smaller number. Clegg said he would hand a veto to the police and MI5 – both of which want to retain measures, such as the European arrest warrant, opposed by many Tories.

In a speech at the Chatham House thinktank in London, Clegg said he was completely at one with the prime minister over the coalition plans to negotiate a real-terms freeze in the next seven-year EU budget. The government was defeated in the Commons on Wednesday night when Eurosceptic Tories joined forces with the Labour party to demand a real-terms cut in the budget that will run from 2014-2020.

The deputy prime minister confirmed that the government would not accept an above-inflation increase in the EU budget negotiations. He also launched a strong attack on Labour, which brokered an above-inflation increase and placed the British EU rebate on the table when it led the last budget negotiations during the 2005 UK presidency of the EU.

"Their change of heart is dishonest. It is hypocritical," he said.

But Clegg made clear that coalition relations over the EU remained fragile when he dismissed the prime minister's plans to use a future EU treaty revision to repatriate powers. The EU is expected to revise the Lisbon treaty, possibly after next year's German elections, to provide a legal basis for new eurozone governance arrangements.

Cameron has said he would like to use the negotiations, in which Britain will have a veto, to repatriate some powers. These could be in the areas of social and employment laws.

But Clegg ruled out Lib Dem support for this approach. He said: "I want to focus on a proposal doing the rounds – that the best way to improve the UK's position in Europe is to renegotiate the terms of our relationship with the rest of the EU. We should opt out of the bad bits, stay opted into the good bits, and the way to do that is a repatriation of British powers.

"That seems reasonable. In fact it's a pretty seductive offer – who would disagree with that?

"But look a little closer. Because a grand, unilateral repatriation of powers might sound appealing. But in reality it is a false promise wrapped in a union jack."

Clegg agrees with Cameron that Britain should opt out of some EU law-and-order measures. But under the Lisbon treaty Britain has to opt out of all the measures and then negotiate with its EU partners which measures to opt back into. Clegg made clear that he would not agree to the opt-out until he and Cameron had agreed on which measures to opt back into.

The deputy prime minister indicated that he would give a veto to the police and MI5 which want to retain the European arrest warrant and Europol. He said: "We will led by the experts and the evidence at all time."