Mr Cameron’s allies claim leaving the EU could still cost the UK hundreds of millions of pounds and may not help cut immigration.
David Cameron is to travel to Iceland rejecting calls from eurosceptics to use the country’s detached relationship with the EU as a model for the UK.
The Prime Minister will attend the two-day Northern Future Forum and hold further talks with European leaders as part of his bid to negotiate reform of Britain’s role with Brussels.
But Mr Cameron is dismissing suggestions he should rebrand a new deal for Britain in the EU as «associate membership» ahead of his planned referendum in 2016 or 2017.
«You’re either a member of the European Union or you’re not,» said the Prime Minister’s official spokeswoman.
And on an Iceland or Norway-style option, a senior Government source told Sky News: «It’s not necessarily a land of milk and honey.
«People need to understand there are significant downsides.»
In what marks a shift to a more pro-EU tone than previously, Mr Cameron’s allies are also claiming Brexit could still cost the UK hundreds of millions of pounds and may not help Britain cut immigration.
Government sources say the PM’s plan is to renegotiate the UK’s relationship with the EU with the aim of staying in a reformed bloc, but they insist he rules nothing out if he is not successful.
But Mr Cameron is also expected to confront some of the arguments mounted by eurosceptics, who claim being part of the European Economic Area – like Norway – is «the only realistic option» should the UK leave the EU.
At the forum, the Prime Minister will hold talks with the leaders of Norway and Iceland, which have negotiated a different deal with the EU.
Both are members of the European Economic Area (EEA).
The EEA is an agreement between the EU and three members of the European Free Trade Association (EFTA), Norway, Iceland and Lichtenstein, which gives the countries tariff-free access to the EU’s single market.
In return, according to Downing Street sources, these countries have to accept all EU rules on goods, services, capital and people in addition to various other EU rules, including employment law, health and safety, competition, transport and environmental law.
They also have to contribute money to the EU, which in Norway’s case totals around €600m a year.
Allies claim Mr Cameron has identified five key questions for anti-EU campaigners backing the Norway model for the UK.
:: Would the UK still have to follow EU rules but with no say over how they’re set?
According to a 2012 report commissioned by the Norwegian government, in terms of relative impact, Norway currently accepts around three-quarters of EU rules but with no votes on these laws.
:: Would the UK still be fully subject to EU free movement rules?
As part of the EEA agreement, Norway has to fully accept the principle of free movement of people. In fact, it takes in over twice as many EU migrants per head as the UK.
:: Would the UK still be forced to pay into the EU?
Norway has to pay hundreds of millions of euros in membership fee to access the single market.
:: What would it mean for the UK’s existing trading arrangements?
Becoming like Norway would mean leaving the EU’s common trade policy. So the trade deals covering 52 states which the UK has via the EU, worth billions of pounds, and underpinning around 60% of all UK trade, would have to be renegotiated.
:: Would you get 31 other governments and parliaments to agree?
If the UK wanted to leave the EU and join this looser grouping, it would need the approval of not just all 27 EU states but Norway, Iceland, Liechtenstein and even Switzerland.