David Cameron has insisted it will be for voters to decide if Britain remains within the European Union as it emerged that 50 Tory MPs are poised to lead the campaign for Britain to quit.
The Prime Minister said the renegotiation would "make sure that Europe works in Britain's interest" but political parties would not seal the UK's fate in the referendum that follows.
Former Cabinet ministers Owen Paterson and John Redwood are among backers of the newly formed Conservatives for Britain (CfB) that will initially support the premier's bid to renegotiate terms of membership for the UK.
But the group stands ready to lead the charge for exit if the deal the premier secures fails to gain major changes, with its founders calling for full control over British laws and free trade powers.
Asked about the CfB as he arrived for the G7 summit in Germany, Mr Cameron said: "What we are having is a renegotiation followed by a referendum. It'll be a renegotiation to make sure that Europe works in Britain's national interest and then the referendum, which won't be for individual parties to decide, it will be for the British public to decide in an in/ out referendum."
Foreign Secretary Philip Hammond has said the Government is keeping "all our options open" over Britain's future in the EU.
Leaving the door open for the referendum on membership to be staged next year, he said the poll would be staged as soon as Mr Cameron had secured a package of reforms.
Asked if he could campaign to leave the EU, Mr Hammond said the Prime Minister had been "very clear that he rules nothing out".
He told BBC 1's Andrew Marr Show: "If our European partners were to simply block us and say look we can't do any of this stuff, we can't meet any of your demands, we can't fix this relationship between Britain and the European Union then, of course, we have got to keep all our options open."
Mr Hammond said treaty change was needed to protect any reforms Britain secures from "judicial attack".
"We have made clear we will go ahead with the referendum as soon as we are ready. As soon as we have got the package agreed we will have a referendum campaign and the referendum," he said.
Britain is looking for a system where a group of countries could operate a "red card" system over plans drawn up in Brussels but a unilateral veto - something Mr Baker is demanding - was not achievable, he added.
"If you were talking about the House of Commons having a unilateral red card veto, that's not achievable, that's not negotiable because that would effectively be the end of the European Union."
He added: "Our experience is that the European Union when it puts its mind to it can be quite flexible and quite effective. We have actually had two treaty changes since 2010 on issues which eurozone members wanted to get done.
"So, they can do these things when they want to do them. We expect some hard positions to be set out at the beginning of the negotiation but this is a negotiation and we will press our partners on these points.
"We will see where we can get to by the end of the negotiating period."
Asked about the CfB, Mr Hammond said: "There was always going to be a group of our colleagues who wanted to come out of the European Union come what may. That is not where the Government is. That is not where the majority of British people are."
MPs backing the CfB have met twice in Parliament since the election and MEP supporters are due to hold a meeting in Strasbourg on Wednesday. Outline plans have been drawn up that state the group will "support the party's policy of renegotiation and referendum" but "take an optimistic, globalist view of the UK's future" and "will discuss how to prepare for a possible 'out' campaign".
Conservative MP Steve Baker, the campaign's Westminster chairman, said his call for British sovereignty was a "modest" demand.
Asked whether Mr Hammond's claims that such a move would be unachievable meant CfB would now campaign for exit, the backbencher said he expected to but other members would make their own choice.
"Personally, I have always expected to campaign to leave," he told BBC Radio 4's World this Weekend.
"Colleagues in Conservatives for Britain will be making their own decisions," he added.
"They are not signed up to a particular red line. They will make their own decision. What we are committed to is to examine what is renegotiated and also to be prepared to talk about an out campaign.
Labour leadership candidate Andy Burnham said his party would run a separate "Labour Yes" campaign if he takes its top job.
He said: "David Cameron will continue to struggle to get the best deal for Britain if his party tears itself apart over Europe. Now that the Tory campaign against EU membership is taking shape, Cameron needs to show that he can deliver reform in Europe or make way for a party that can.
"Labour under my leadership will be a strong pro-European Party which, through a constructive relationship with European partners, is able to make the changes we need to see. It is imperative that we go into the EU referendum with changes to meet the public's concerns on immigration. But I am becoming less confident by the day that David Cameron will be able to deliver them."
Former deputy prime minister Lord Heseltine urged ministers to toe the government line on the EU to avoid "absolute chaos".
Asked whether ministers should be free to stand up for what they believe in, he told BBC 5 live's Pienaar's Politics: "That's chaos. That's absolute chaos. You'll go to one minister who says 'black is white' and another minister who says 'white is black' .
"You can't govern a country like that. People rely on ministers to have a clear view which they can support collectively, and a huge range of people take decisions knowing what the government policy is."