David Cameron in last-ditch talks on EU reform deal

David Cameron was engaged in the early hours of Friday in a last-ditch bid to secure an EU reform deal which will allow him to call a referendum on British membership on June 23.

The Prime Minister warned EU leaders on Thursday that he was ready to walk away from their summit in Brussels without a deal unless they gave ground on key British demands and provided him with a "credible" package he can sell to voters.

As officials began intensive negotiations expected to stretch through the night, the PM conferred with European Council president Donald Tusk on how to keep the deal on track, following discussions which Downing Street said showed little sign of bridging differences with a number of the other 27 EU states.

The Prime Minister urged fellow leaders to agree a new "live and let live" settlement which he said could resolve the "festering" problem of Britain's relationship with Europe for a generation.

But as the first session of talks broke up on Thursday evening, a Number 10 source said there was more work to do on key issues including migrant welfare, child benefit, relations with the eurozone, treaty change and a British exemption from the requirement for "ever-closer union".

With leaders due to return to the negotiating table at breakfast-time to assess progress made overnight, the possibility remained that a summit described by Mr Tusk as "make or break" could end without a breakthrough, almost certainly delaying a referendum until after the summer.

"The Prime Minister left them in no doubt that we are only going to do an agreement at this summit if we make some real progress from where we were at 8.30 this evening," said the Number 10 source.

"If we don't, we are not going to have an agreement at this summit.

"There is some real hard work to do overnight and we have got to see real progress."

Despite a string of European leaders, including German Chancellor Angela Merkel, saying they were ready to be constructive about finding a resolution to Britain's concerns, the Downing Street source said Mr Tusk shared the PM's assessment that more movement was needed to secure a deal.

"While many countries said they wanted to help keep Britain in the EU, there wasn't much sign of how they are planning to do that in practice," said the source.

Meanwhile, Mr Cameron faced demands from other EU states for a "no second chance" agreement to pre-empt the possibility of a second referendum.

Belgium - backed by France - proposed that the summit conclusions should state that any deal agreed this week is final and Europe will not come back with an improved offer if Britain votes to leave the EU.

The move is designed to quash the idea, backed by some Eurosceptics and reportedly floated privately by London mayor Boris Johnson, that a Leave vote would give the UK leverage to extract further concessions from the EU before a second poll.

With the 28 EU leaders still far from consensus, Britain's line on key welfare measures appeared to be hardening.

It is understood the PM has set his face against calls from eastern Europe for cuts in child benefit for offspring living overseas to be imposed only on new migrants.

Mr Cameron wants the new system - under which payments would be made at the lower rates of the migrant's homeland - brought in quickly and believes it is not acceptable for it effectively to be phased in over 16 years as the children of 34,000 existing claimants in the UK reach adulthood.

UK officials declined to comment on reports that the PM was asking for a proposed "emergency brake" on in-work welfare payments to EU migrants to last for seven years, with the option to extend it twice by a further three years to a total of 13.

Addressing fellow leaders at the start of the two-day summit, Mr Cameron said the question of Britain's relationship with the EU had been "allowed to fester for too long".

He told them he needed a package that would be "credible" with the British people and strong enough to persuade them to vote to remain in the EU.

The new arrangement on offer would be a "live and let live" settlement under which states which want to integrate further will be free to do so, while those which do not can rest assured their interests will be protected, he said.

If a deal is reached on Friday, Mr Cameron is expected to hurry back to London for a special Cabinet meeting to endorse the agreement and set a referendum date.

He would also grant Eurosceptic Cabinet colleagues like Iain Duncan Smith and Chris Grayling the freedom to start campaigning for Britain to vote Leave. And waverers like Mr Johnson and Justice Secretary Michael Gove could be expected to declare which side they will back.

The Daily Telegraph reported that pro-EU campaigners were confident of securing the backing of at least 80 of the FTSE 100 firms, in what would be a significant boost for Mr Cameron and the "remain" camp.