EU President Donald Tusk offered London sought-after concessions Tuesday, including measures to limit welfare payments to European workers, in the hope that British citizens will decide to stay in the European Union in a promised referendum on membership.

"To be, or not to be together, that is the question," Tusk wrote on Twitter as he unveiled his proposals for a deal with Britain, using a famous line by British playwright William Shakespeare.

British Prime Minister David Cameron said the proposed reform "delivers substantial change," adding that "there's more work to do" before final agreement.

Cameron has demanded a series of changes to the country's relationship with Brussels before putting its continued EU membership to a referendum, which he has promised to hold by the end of 2017.

The draft proposal must now be negotiated with the bloc's other 27 member states, who have so far not been involved in the talks. The issue is expected to dominate the next summit of EU leaders, on February 18-19, with many countries wary of Britain's demands.

The proposal negotiated between London and Tusk's office offers responses to Cameron's four sets of reform demands, in the areas of competitiveness, sovereignty, social security and economic governance.

"At the beginning of this process we set out four areas where we wanted to see substantial change, and this document delivers that substantial change," Cameron said.

One of the most controversial requests has been the restriction of in-work benefits for other European citizens, in an effort to limit the number of people seeking work in Britain. The free movement of workers is one of the EU's most cherished achievements.

The proposal states, however, that this right can be restricted "on grounds of public policy, public security or public health."

It suggests a "safeguard mechanism" to deal with a high and prolonged inflow of workers from another EU country. This would allow Britain to restrict access to in-work benefits for up to four years, if other EU capitals agree to this.

It remains to be decided how long Britain would be able to use this mechanism for, an EU source said on condition of anonymity.

"We do believe in free movement... but the pressure [of migration] has been too great," Cameron said in a speech later Tuesday.

London has also sought to safeguard its sovereignty, seeking an opt-out from the EU's stated ambition of "ever closer union," as well as more power to block legislation out of Brussels.

In response, the text states that Britain is "not committed to further political integration into the EU."

It also proposes a so-called "red card" system that would allow 55 per cent of national parliaments to club together and stop or amend proposed legislation out of Brussels within 12 weeks of it being presented.

"[The] idea we are being sold that a joint 'red card' is some sort of victory is frankly ludicrous," Nigel Farage, leader of the anti-EU UK Independence Party, wrote on Twitter, claiming the agreement was a "complete con."

But Cameron defended the "red card" principle, saying he had achieved similar breakthroughs on the "emergency brake" on in-work benefits for EU migrants and on Britain's exemption from EU's principle of seeking "ever closer union."

If approved by other member states, the legally binding reform text would immediately take effect if Britain decides to remain in the EU.

Diplomats from EU member states will have their first chance to discuss the proposals at a meeting behind closed doors on Friday, according to commission spokesman Margaritis Schinas.

"The objective is to have an agreement at 28 at the February [summit]," he added, nothing that any deal should be "fair for Britain and also fair for the other 27 member states of the EU."

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