The challenge facing David Cameron over Europe has been highlighted by Kenneth Clarke's description of a referendum as a "gamble" and calls from Eurosceptic Conservatives for a complete repatriation of social and employment laws.
In the runup to the prime minister's long-awaited speech on Europe, Clarke has warned that referendums are normally proposed by "hangers and floggers".
The intervention by the veteran former chancellor, as Cameron prepares to brief a political meeting of Tory cabinet ministers on his speech, comes as the Fresh Start group warns that "the status quo is no longer an option". The backbench body calls for "a new and different relationship" with the European Union.
Clarke, the most pro-European Tory member of the government who campaigned a decade ago for Britain to join the euro, warns that the prime minister's strategy could end in British withdrawal from the EU. Cameron will pledge to hold a referendum on a "new settlement" which he would negotiate, if elected with a majority, when a major EU treaty revision takes place to underpin new eurozone governance arrangements.
Clarke identified a hard core of Tory MPs who want to leave the EU. In an interview with the Financial Times the minister without portfolio likened them to Tory supporters of capital punishment in the 1970s who demanded a referendum on the issue because they could not command a parliamentary majority. "If you realise you're doomed in parliament you demand a referendum – that's what the hangers and floggers used to do," he said.
Clarke accepts a referendum is inevitable and is to join forces with Lord Mandelson to launch a new pro-European group, the Centre for British Influence through Europe. "All referenda are a bit of a gamble," he said. "I don't think we can take a yes vote for granted.
"I think one of the problems is, because so much of the media is overwhelmingly Eurosceptic, no one has really campaigned very vigorously for the case for British leadership in the EU for probably a decade or more."
Clarke warned Britain would damage its interests if it left the EU. He said: "I think if Britain ever does leave the European Union it will be difficult to adjust to our loss of a leading role in the political evolution of Europe and our reduced role in the global political world."
His warnings came as the Fresh Start group called for what it called four "significant revisions" to treaties governing the EU. The Daily Telegraph reported that the group will call for:
• A complete repatriation of social and employment laws such as the working time directive which imposes a 48-hour working week. Britain has an opt-out from that aspect of the directive.
• A opt-out from all criminal justice measures.
• An "emergency brake" that would give Britain an effective veto over new financial services regulations which are currently decided by qualified majority voting (QMV).
• An end to the monthly plenary sessions of the European parliament held in Strasbourg.
Its manifesto says: "If negotiation to repatriate these powers failed, we should consider the unilateral disapplication of EU social and employment law in Britain through an act of parliament. This is an extreme option and could well result in fines or suspension of obligations from other EU nations However, this would not be a petulant act, but rather a signal that this is a red-line issue for the UK."
The group's proposals, described by one of its leaders Andrea Leadsom in the Guardian last month as "nuclear", will be given a formal welcome by ministers, who will accept some but reject others.
The prime minister hopes to revise the working time directive. He is currently engaged in a battle with Nick Clegg over EU criminal justice matters which have to be decided by next year. Officials believe it is unlikely Cameron will win an "emergency brake" on financial service regulations because France would demand one too. Britain opposes the monthly commute to Strasbourg but it was formalised as a treaty instrument by John Major at the Edinburgh European summit in 1992.
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