European Commission chief confident UK-EU deal will be struck

The president of the European Commission has said he is "quite confident" that a deal over Britain's relationship with Brussels will be struck next month.

The UK's demands are "very difficult issues" to work out but a "permanent solution" will be found when leaders meet, Jean-Claude Juncker said.

David Cameron wants an exemption from the commitment to "ever-closer union", restrictions on benefits for migrants, protection from eurozone integration and improvements in competitiveness.

But the Prime Minister faced warnings from fellow leaders last month that his proposals could be "unacceptable".

At a press conference in Brussels, Mr Juncker said all of the demands put forward were tough to resolve but the calls for welfare changes were particularly difficult.

He added: "All of these are very, very difficult issues that we have to work hard in these days to come to common, not only ideas, but agreements.

"I'm not optimistic, I'm not pessimistic."

He added: "I'm quite sure that we will have a deal, not a compromise, a solution, not a weak compromise, a permanent solution in February."

It comes as George Osborne said no planning is being done by the Treasury for the consequences of Britain voting to leave the EU.

The Chancellor said the "essential pieces" of Mr Cameron's push to secure a reformed relationship to persuade voters to back continued membership were falling into place.

Speaking after talks in Berlin with counterpart Wolfgang Schauble, he said Germany and France were among an emerging consensus that Britain was making a "perfectly reasonable case for change" that could benefit the whole bloc.

He dismissed the prospect of a second vote, insisting the referendum would settle the question of Britain's membership for at least a generation and probably for his lifetime.

Asked if Treasury officials were drawing up plans for Britain leaving the EU, Mr Osborne told BBC2's Newsnight: "No, the Treasury is 100% now focused on achieving the renegotiation.

"That is where the resources of the Treasury are deployed."

Mr Osborne joined the Prime Minister in insisting he had not ruled out campaigning to leave the EU if a deal could not be struck but said he was "optimistic" an agreement could be reached.

"Just a few weeks before a crucial European Council where we're going to make these decisions ... I see the essential pieces of the deal falling into place."

London mayor Boris Johnson is among those who have suggested that a public endorsement of Brexit could prompt fresh negotiations on an improved deal to put to the public.

"There's no second vote. This is the crucial decision of our lifetimes," Mr Osborne said.

Responding to Mr Juncker's comments, a Downing Street spokesman said: "We have always said that we will be driven by substance, rather than schedule.

"Clearly, if we can get the deal done in February, then that will be good progress.

"But, ultimately, the most important thing is getting the renegotiations done and getting the best possible deal and bringing that back for the British people."

The spokesman said pro-European Education Secretary Nicky Morgan had not breached the terms of Mr Cameron's instruction to ministers not to campaign for either the Remain or Leave side until his negotiations are complete.

Speaking in The House magazine about the renegotiation, Ms Morgan said: "I am expecting that the Prime Minister will be successful and I will be expecting to campaign to stay in."

The spokesman said this was within the terms of Mr Cameron's letter earlier this week, in which he told ministers that collective Cabinet responsibility would be suspended once the negotiations were concluded, but that until then they should "continue to support the position set out in our manifesto".