David Cameron will today concede to his Tory backbenchers that he will limit public money for a pro-EU campaign in the upcoming referendum.
In a bid to pacify its slim majority, the government will reassure its Eurosceptic MPs that there will be no taxpayer-funded push for the UK to remain in the EU.
The move comes after Tory MPs were angered at Cameron's attempt to scrap "purdah" rules - which would allow the Prime Minister to use Whitehall resources in the campaign.
Just six weeks after the Conservatives' General Election victory, it has been reported that Tory whips warned MPs against a rebellion, saying "now is not the time for division".
"It has done damage"
One Eurosceptic Tory MP told The Telegraph that "of course [the purdah issue] has done damage. It is incredibly unwise to provoke this row at the moment. It is completely unnecessary".
However, Number 10 insisted plans to change the purdah rules were not related to government spending in the campaign, but instead to give ministers freedom to air their views.
The Prime Minister's spokesperson attempted to reassure MPs, saying:
Our aim here is to look at how we can address people's concerns on the purdah point, while retaining the ability for the government to publish things during the referendum campaign without being constrained in the way it would have been previously.
That's the objective as we look to work on this. Committee stage [of the EU Referendum Bill] will provide an opportunity to discuss with MPs how we might address people's concerns.
Business leaders voice their concerns about the way government resources could be used in the campaign.
Robert Oxley, campaign director of Business for Britain said:
Purdah rules go to the heart of fairness in any democratic vote. By scrapping the rules that prevent the machinery of government being used to unduly influence the outcome of a referendum, the Government look like they are stacking the deck.
The poll must be fair, otherwise the result will lack legitimacy in many people’s eyes making it impossible for the Government to win the argument, not matter what they do. Ministers have clearly been poorly advised on the need for purdah rules and should think again before they damage the credibility of the whole process.