A member of Jeremy Corbyn's shadow cabinet has threatened to resign if the new Labour leader decides the party should campaign to quit the European Union.
In the latest sign of division over Europe within Mr Corbyn's top team, Lord Falconer said he would be placed in an "impossible" position if the party decides to support a British exit.
There has been confusion over Labour's policy on Europe, with Mr Corbyn appearing to leave the door open for the party to back a vote to cut ties with Brussels despite his shadow foreign secretary Hilary Benn insisting it would not "walk away" from the EU.
Addressing his first meeting of the Parliamentary Labour Party as leader, Mr Corbyn insisted they "can't just give (David) Cameron a blank cheque".
His position was supported by shadow chancellor John McDonnell, who told the BBC: "We are consulting others about the sort of reforms that we want and Jeremy has said quite clearly he wants to remain in Europe but we want to see what Cameron's package is. That's fairly reasonable. The British people want to know that as well, so we will see what Cameron comes up with."
He added: "We are not going to give Cameron a free hand on any negotiations at all. We want to see what he comes up with. At the moment it's trying to get a good Europe, trying to get a Europe that serves all our interests, and I think we can do that."
But shadow justice secretary Lord Falconer told BBC Radio 4's World at One he believes the UK should stay in the EU "come what may".
He added: "My view in relation to Europe is, yes, we should definitely fight for as good a deal on workers' rights as possible, but my view is we should stay in the European Union come what may.
"So whatever the result of the negotiations, I believe that Britain would be so damaged by leaving the European Union - or indeed saying it's going to leave the European Union - that we should stay."
He added: "If the Labour Party adopts a position which says that we might leave the European Union and might argue against it, then of course my position would become impossible at that point.
"But that is not the current position and the right thing, I believe - whether you are in the shadow cabinet or outside - is to take part in the particular debate that's going on."
The debate over Europe comes as Mr Cameron attempts to negotiate a new deal for the UK before an in/out referendum by the end of 2017 - although the public vote is widely expected to be held earlier.
The issue is being considered at the TUC Congress, amid warnings that workers will vote against Britain remaining in the EU if their rights are watered down in any renegotiation of the country's terms of membership.
GMB leader Sir Paul Kenny said he could not recommend his members support measures that would weaken employment rights.
"This is about treating workers as first-class citizens, not third-class citizens."
Unison leader Dave Prentis said: "If these rights are taken away, how can we support a Yes vote in the referendum? We would be voting for worse rights."
Mr Benn insisted leaving the EU is not the way to protect workers' rights and added that Labour is committed to "not walking away".
He said: "Being in Europe has protected and improved workers' rights in Britain, giving everyone statutory paid holiday, limits on working hours and improved maternity and paternity leave.
"We are strongly opposed to any attempt by David Cameron to try and weaken these, but the truth is if we want to protect workers' rights the answer isn't to leave the EU, but to get rid of this Tory Government.
"That's why the Labour Party has always been committed to not walking away, but staying in to work together for a better Europe."
It comes as a poll put voters neck and neck over whether they want Britain to leave the EU or remain within it.
The ICM research found 43% want to stay in the EU and 40% back a so-called Brexit, while 17% do not know.
Dominic Cummings, a key co-ordinator in the campaign for Britain to leave, commissioned the study.
He said: "As more people realise that their jobs and living standards will be secure, and as more businesses speak out, it is reasonable to think that the polls will move towards 'leave'."
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