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We need to settle this once and for all for the sake of Britain, he said.

"It is right that the British people should make the decision on whether the United Kingdom stays in the European Union or leaves altogether just as it was right that the Scottish people made the decision about their future in the UK.

"Every poll shows that whatever their view on the answer to that question the overwhelming majority want the right to decide.

"In the 41 years since the United Kingdom joined the European Economic Community, in the 39 years since we last had a referendum on Europe, the EU has changed profoundly.

"It has grown enormously in its power and its reach. It's grown in its competences, its legislation has spread and the role of the European Parliament has increased almost beyond recognition at the expense of the other European institutions.

"It has morphed from a common market into a putative superstate.

"Put plainly, Europe today is very different from the Europe people voted for in 1975 and yet the British people have never been asked whether they agreed with any of these changes.

"So it should be no surprise to us that democratic support for the EU is fragile to put it diplomatically. Ever closer union has led to ever greater disillusionment."

Mr Hammond added: "This is surely the most important strategic question facing this country today - the future of our relationship with the European Union. And it is a question on which we should trust the instincts of the British people."

Douglas Alexander, the shadow foreign secretary, said there was no appetite in Europe for the reforms Mr Cameron wants, which he said would require treaty change.

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Britain is 'lighting a fire' under the European Union, says Philip Hammond