Brown in crisis talks with Labour MPs as he battles 10p tax rebellion

GORDON Brown, the Prime Minister, held an emergency meeting with Labour MPs last night in a bid to face down the threat of a major Commons rebellion on the scrapping of the 10p income tax band.

He was addressing the Parliamentary Labour Party for the second time in a fortnight as an "olive branch" offer of looking again at the losers under the tax changes was greeted coolly in the Commons.

Some 70 backbenchers and half-a-dozen ministerial aides have publicly voiced concern over the changes, which were announced in last year's budget and came into effect this month.

The government will next week face a showdown with rebels over an amendment being tabled by former minister Frank Field, which would delay the scrapping of the 10p band until measures are introduced to ensure that low-paid workers do not lose out.

Yvette Cooper, Chief Secretary to the Treasury, said that an ongoing government review into child poverty would be widened to include childless couples hit hardest by the changes.

This will report in time for the pre-Budget report in the autumn and may make recommendations for further tax changes in next year's budget.

But there would be no immediate changes to the tax code, Ms Cooper said. "We will be consulting with stakeholders, with MPs and with different groups within the next phase to tackle poverty," she said.

One Labour backbencher, Jim Cousins, immediately warned Ms Cooper that people were already losing out in their paypackets – the changes came into effect earlier this month – and could not afford to wait a year.

George Osborne, the Shadow Chancellor, said: "Judging by Yvette Cooper's mauling by Labour backbenchers in the Commons, government attempts to buy off the Labour tax revolt have failed.

"MPs of all parties know how unfair it is to target tax rises on the poorest – and desperate promises of future seminars and studies won't help 5.3 million low income families who are being hit by the government. We now have a government fighting itself when it should be fighting for the country."

Liberal Democrat leader Nick Clegg said: "After weeks of pressure, all this tired government has been able to come up with is yet another review.

"This is a desperate attempt to calm Labour MPs who are taking the blame from voters for Gordon Brown's decision to hit some of the poorest workers with a big tax rise for the sake of easy headlines."

Earlier in the day, the Prime Minister defended his tax policy as he addressed the Scottish TUC conference in Inverness.

Mr Brown acknowledged that there was a "debate" over the scrapping of the 10p rate but insisted that the tax regime he had put in place as Chancellor had helped thousands of low-income families.

He said: "We have done more as a government in the last 50 years on poverty than any other government.

"I can say today that, as a result of what we have done, and I know there is a debate about 10p taxation, as a result of what we have done, three million families with children are, since 1997, £80 a week better off.

"And as a result of what we have done, two million pensioners, because of the pension credit, the winter allowance and everything else we have done including free TV licences, are £40 a week better."

In the Commons, Ms Cooper disputed that 5.3 million families would lose out once larger winter fuel payments were taken into account.

She said half of those losing out did not actually fall into the lowest income brackets. Aides explained later that she could be referring to wives who earned small amounts but whose husbands were on large salaries.

Ms Cooper said many had gained under Labour, though not necessarily this year. "It's not always possible to help everyone," she said.

But Labour MP Frank Field said: "I hope the government will be able to find its way, not to unstitch the budget, but to bring forward specific proposals to ensure that those on the lowest pay are not worse off."

REBEL WITH A CAUSE

FRANK Field, the former welfare minister, quit his only government job in 1998 after just 15 months in the post.

The main reason was his falling out with Gordon Brown, who was then chancellor.

Mr Field, the MP for Birkenhead, admitted a civil war had broken out between his social security department and the Treasury – then the domain of Mr Brown.

At the time, he said: "It is entirely true that Gordon was trying to block my ideas on pensions."

A decade on, it seems the ceasefire is at best shaky.

Mr Field is threatening to table a rebel amendment calling for a compensation package for the low-paid who will suffer under the abolition of the 10p tax rate.

The welfare expert has very different ideas to the now Prime Minister on how to tackle poverty.

His pragmatic approach, favouring more self-help and fewer hand-outs, has seen the veteran MP being groomed to cross the floor to the Conservative side.

He was born to a Conservative-supporting family in 1942 but switched allegiance aged 17 after disagreeing with the party over apartheid in South Africa. He has been an MP since 1979.