Chancellor refuses to be drawn on whether he is willing to leave European Union if negotiations over Britain’s relationship fail

Conservative party backbenchers will be given a free vote in the referendum on Britain’s membership of the European Union in the next parliament, George Osborne has said.

The chancellor staved off demands to say the Conservatives might take Britain out of the EU and instead predicted the party would achieve a successful renegotiation of Britain’s relationship.

His remarks on Monday will disappoint Eurosceptics in his own party and be treated by Ukip as a sign that the Tories are not serious about negotiating a new relationship.

The chancellor gave a preview of the Conservatives’ election attack on Ed Miliband, urging voters to visualise the possibility of the Labour party leader going through the door of Downing Street, and recognise the threat to the economy such a prospect represented.

Osborne is trying to establish a firebreak on the disastrous start to the party’s conference caused by the defection of Mark Reckless to Ukip, and the ministerial resignation of Brooks Newmark.

Overnight, Osborne announced the abolition of a punitive 55% tax on pension pots levied on some families at the point of transfer of the pot. He is expected to make larger announcements in his conference speech on Monday, including a challenge to the Liberal Democrats and Labour to match him on his plans to cut welfare spending in the first two years of the next parliament. He has said the country cannot afford to have a large working-age welfare bill.

Osborne has said he believes that without a reduction in the welfare budget large cuts will have to be made to departmental spending.

In broadcast interviews on Monday, he refused to answer repeated questions about whether he was willing to consider leaving the EU if negotiations on a restructured relationship failed. Instead he said he was planning for success.

“People will know what the Conservative policy is but ultimately it will be a free vote for backbench Tory MPs, but people should be in no doubt that a Conservative government will put forward its proposals, the reform we will have achieved, the renegotiation we will have achieved, the successful outcome of that renegotiation.

He added: “If we did not think it was in Britain’s interest to be in the EU we would not argue for it. Anyone who doubts that David Cameron will deliver should look at the Scottish referendum. He made a promise to hold a Scottish referendum; there were plenty of people that said don’t do that.

“People can trust our prime minister to deliver on a referendum but we need to be in office to do that, and that will be one of the choices at the next election The way to resolve this issue is to bring it to a head, put it to the people, and then our country can move on. If people want to leave they will have that choice in that referendum.”

Osborne is fighting on two fronts as he seeks to both fend off the advance of Ukip and mount a strong attack on what he regards as the main choice at the election, between Cameron and Miliband.

He said voters would need to choose between economic growth and a plan for the economy under Cameron, or a return to the past and its economic mistakes under Miliband. “And those are the only two outcomes of the election next year,” he said.

“I think the more people focus on that choice, the more people, if you like, visualise Downing Street and who’s going to walk through that door after the election, the more people will realise that it is the Conservative party who offer a brighter future for our country.

“Britain is growing faster than any other major economy in the world – 2m jobs or so have been created in this economy – so that is a plan that is working.”

He denied the link between economic growth and individual living standards had been broken, a claim often made by Labour. “In the end, the prosperity of a nation is not separate from the prosperity of the people who live in that nation.”

Insisting he had taken the tough but necessary choices that Labour would duck, Osborne said: “I’m giving people evidence of how that plan works for them, whether they are young couples who can’t get on the housing ladder – we’ve got a plan to help them with new starter homes – whether they’re young unemployed people who face a life on the dole – we’ve got opportunities and apprenticeships for them – or now, people who save through their life … I am today abolishing the tax that exists when you try and pass on your unused pension to your children and your grandchildren. That is a major change in pensions, it’s all about helping people who have worked hard and saved hard and it’s precisely what you can do if you’ve got an economic plan that is working.”

But the Conservative MP Owen Paterson kept up the pressure from the right, telling the BBC Radio 4 Today programme: “We have to be absolutely clear to those small-C conservatives out there who may be sitting back at the moment. Some might go to protest parties like Ukip.

“We have got to be respectful of them and we have got to make a very clear, intelligent case that the only national organisation that can resolve the long-term problems of the UK is the Conservative party.

“Ukip is a symptom of this problem. We have to convince these people that we are serious … however frustrated they may be, they must see that the Conservative party can deliver.”