LABOUR leader Ed Miliband says plans for an in/out referendum on membership of the European Union are wrong and threaten to undermine business confidence in Britain as a trade partner.

He was responding to the renewed debate on membership of the EU after the UK Independence Party's success in the local elections and the intervention of former chancellors Lord Lawson and Lord Lamont, who both said they would vote to leave in any future referendum.

The Labour leader accused David Cameron of putting efforts to hold the Tory party together over Europe ahead of the national interest.

He claimed the Prime Minister was forced into promising to hold an in/out referendum in 2017 by his own backbenchers but it would result in "four years of uncertainty" for British business.

Miliband insisted the UK should stay inside the European Union and press for changes to "make it work better for Britain".

Some Tory backbenchers hope to force a Commons vote next week in protest at the Prime Minister's failure to table legislation paving the way for the referendum.

Downing Street says the Prime Minister is "relaxed" about the rebel amendment and hinted he could even let Tory ministers back it.

But Miliband said: "I know David Cameron is a man who likes to be known for relaxing – even chillaxing – but, on this occasion, it beggars belief. He's not lying on the sofa, relaxed. He's hiding behind the sofa, too scared to confront his own MPs.

"It's not chillaxing. It is weak and panicked. He's flailing around, directionless, unable to show the leadership the country needs - And why is the Prime Minister in this position?

"Because he has consistently failed to lead his party on Europe and is, instead, being pushed around by his own backbenchers. That's the only reason he changed his mind in January on his previous position on an in/out referendum. It wasn't about the national interest, it was simply about his party interest."

Meanwhile, senior Labour peer Lord Adonis has warned the party must draw up plans for a possible coalition with the Liberal Democrats if it fails to win the next General Election outright.

Adonis said a detailed strategy was vital and should include proposals to grant senior ministerial posts to the junior partner's MPs.

The former transport secretary, played a central role in Labour's failed bid to secure a deal with the LibDems in 2010.

"If we're responsible about governing the country then we have to prepare for serious eventualities," he said.

"It was a big mistake before the last election, as I think all of the key players on the Labour side now realise, not to prepare properly for coalition negotiations."

l The Chancellor has said there is an "improved outlook" for the world economy but it remains fragile.

George Osborne spoke after hosting "constructive" talks with G7 finance ministers and central bank chiefs in a Buckinghamshire hotel.

He said there was more agreement between wealthier nations on how to nurture the recovery than was often suggested.

'Cameron isn't chillaxing on his sofa over Europe: he's hiding behind it, scared of his own MPs'