Lord Lawson warns it would be 'virtually impossible' for David Cameron to win a new deal from EU that would justify Britain's continued membership

David Cameron is under mounting pressure on Europe after the former Chancellor Lord Lawson warned it would be “virtually impossible” to win a new deal from the EU that would justify Britain's continued membership.

Jubilant Conservative Eurosceptics stepped up their demand for an early EU referendum after Lord Lawson predicted that the Prime Minister would fail to win a significant “new settlement” from the UK's European partners.

The former Chancellor, who persuaded Margaret Thatcher to join the European exchange rate mechanism against her Eurosceptic instincts, announced that would now vote to leave the EU in the referendum Mr Cameron has promised by 2017 because exit would be “on balance good for the [UK] economy.”

His intervention is a headache for Mr Cameron, who said in January that he wanted Britain to remain in the EU and hoped to recommend a vote to stay in on improved terms in the referendum.

Calling the Prime Minister's Europe strategy into question, Lord Lawson told BBC Radio 4: “I have a lot of friends within what I call the 'eurocracy' and they all assure me that he will not be given any significant changes at all. It's the nature of the EU that there is only one way of travel, which is to more and more powers to the centre, and they believe this sincerely.... They are also afraid that if they give concessions to us, then there will be demands for concessions from others and the whole thing will unravel.”

Lord Lawson dismissed a warning by Nick Clegg that leaving the EU could cost Britain 3m jobs. “That's poppycock, but I don't think Nick Clegg, who's a charming young man, has ever purported to know anything at all about economics,” he said.

The Deputy Prime Minister said: “I think we need to transform the EU to make it more transparent more efficient, more democratic where we can, but not turn our backs on it because doing so would make us less safe and less prosperous.”

Asked if Lord Lawson's intervention had made today another “good day for Ukip” after its advance in last week's local elections, Mr Cameron told a press conference: “It's been a good day for the pledge that I have made, that if re-elected I will hold an in/out referendum so that everybody can have, not just a voice about Britain's future in Europe, but also can have a vote about Britain's future in Europe.”

Mr Cameron said the Conservatives were the only “major party” pledging to hold a referendum on the UK's future, but defended the decision to hold a vote after seeking a renegotiated settlement with Brussels. “There's only one way to get it [a referendum] and that will be by supporting the Conservatives at the next election,” he said.

Nigel Farage, Ukip's leader, said: “The world feels like a less lonely place for me. I think that somebody of Lord Lawson's magnitude saying look 'this thing is gone and anyway Mr Cameron's renegotiation is bound to fail' is a huge boost to Eurosceptic cause in the UK.”

Jacob Rees-Mogg, a Tory backbencher, floated the idea of the Tories making a “big, open and comprehensive” offer of coalition with Ukip, which could include the post of Deputy Prime Minister for Mr Farage,

Sir Gerald Howarth, a former Defence Minister, urged Mr Cameron to use today's (Wed) Queen's Speech to bring in legislation guaranteeing a referendum. “2017 is four, five years away. We need to do something now. The public are not convinced he will hold a referendum,” he said.

But the Speech will not promise a referendum before the 2015 general election because the Liberal Democrats have blocked the idea. Instead, Conservative ministers may support a backbench Bill firming up the promise of a post-2015 referendum, which would put Labour and the Lib Dems on the spot.

In a joint statement, Mr Cameron and Mr Clegg said the Speech will be “ about backing people who work hard and want to get on in life.” They said: “In May 2010 we came together to govern in the national interest. We knew the road ahead would be tough and so it has proved to be. But three years on, our resolve to turn our country around has never been stronger.”