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Gordon Brown told Labour MPs that he understood their concerns over the abolition of the 10p tax rate last night as he tried to head off a dangerous rebellion before the local elections next week.

In what MPs and ministers called a confident performance Mr Brown told the Parliamentary Labour Party (PLP): “I get it”, after three weeks of complaints that he had failed to appreciate the scale of anger among their constituents over the impact of a change made in his Budget last year.

Mr Brown told his MPs: “I understand how difficult it is out there. I understand that people out there are fighting the elections and questions are being asked. With food prices rising, fuel prices rising, people want to know that we do get it, that we understand what is happening to them.”

But he added: “We cannot have the Budget defeated. Issues have come up in the past. We have dealt with those. We have a responsibility to listen, to hear and to understand what has been said. But there is a responsbility on all of us to unite. We have to listen [but] we have to unite.”

The 10p issue was raised with him at a PLP meeting three weeks ago, when Mr Brown angered his colleagues by suggesting that losers from the move were compensated by other changes.

Mr Brown appeared after last night’s meeting to have bought time in his efforts to prevent a defeat only days before London and local councils go to the polls. He promised to work with Alistair Darling, the Chancellor, to meet the problems in time for next autumn’s Pre-Budget Report.

His words marked a change of tone from a few weeks ago when he insisted that there would be no losers. The Times has been told that Mr Brown called on Labour chiefs to show him payslips that proved that people had lost out at a meeting of Labour’s national executive on March 20.

Then Mr Brown rejected the assertion that anyone would lose out, saying that tax credits had made the 10p band redundant, and that pensioners would be compensated by higher thresholds, the 2p cut in the basic rate and extra winter fuel allowances.

According to an account by Ann Black, an NEC member who represents constituency parties, the Prime Minister said that “no one would be worse off”, and added that he “challenged people to send him payslips which showed otherwise”. A second person present at the meeting has confirmed this account to The Times.

Last night ministers said that Mr Brown had gone a long way to heading off a revolt when the Finance Bill is debated in detail on Monday. But it was unclear how many of the 70 potential rebels would back off.

MPs had been offered a fresh concession earlier when Yvette Cooper, Chief Secretary to the the Treasury, announced that an existing Treasury review into into combating child poverty will be extended to include low income households without children. This is one of the main groups affected by the abolition of the 10p rate.

Then John McFall, the chairman of the Treasury committee, suggested a swift inquiry, reporting by the summer, into how the losers could be helped. This is also likely to be accepted by the Government.

One MP emerging from last night’s meeting said there had been a “complete transformation” in Mr Brown since the unhappy gathering three weeks ago. Another said: “It was a more human, nicer Gordon tonight. He is going to sort it.”

However, that Mr Brown felt the need to attend a meeting he would normally only address once every few months was evidence of the crisis into which the party has been thrown by the 10p affair.

The original inquiry was announced in last year’s Budget and is due to report by the Pre-Budget Report this autumn. Moving the second reading of the Finance Bill, which implements the Budget, Ms Cooper said that the majority of households were better off or the same owing to the “major reforms” in the Budget, but acknowledged that some were paying more.

“It is hard in any one Budget to help everyone and those who lose in any one year may have benefited in previous years, or may also benefit in the next,” she told MPs. “On average those who pay more this year are still around £500 a year better off than they would have been in the 1997 personal tax and benefits system that the Conservatives left us with.”

Some 70 Labour backbenchers and half a dozen ministerial aides have voiced concern over the changes. The former Welfare Minister Frank Field, who has been leading the mutiny, challenged Ms Cooper to bring forward specific proposals to ensure that those on the lowest pay who work “are not made worse off by a Labour Budget”.

Ms Cooper told him: “The Chancellor has said it is his intention to return to this issue in future Budgets and the Pre-Budget Report. He does want to look more at what we can do for those on the lowest incomes, just as we have done in previous budgets.”

She continued: “We will be consulting with stakeholders, with MPs, and with different groups on the next phase to tackle poverty and unfair inequality in Britain.”

The 10p band was formally scrapped this month, but the Finance Bill provides a focus for a rebellion.

The change means that low-earners who would have paid income tax at the lowest, introductory 10 per cent rate will now have to pay the 20 per cent rate. The basic rate of income tax has been lowered from 22p to 20p.

Speaking outside the Commons earlier, David Cameron, the Tory leader, said that 5.3 million people had lost £700 million and offered to work with the Government to compensate them.The Shadow Treasury Chief Secretary, Philip Hammond, called the move to scrap the 10p tax rate “morally abhorrent”.

The scenarios

Worst case Government loses key amendment on Finance Bill next week. Catastrophic losses in local elections. Brown resigns as he sees it as a loss of confidence in his leadership.

Likelihood 1 out of 10

Best case Brown sees off rebellion without further concessions, turns argument on to Tory opportunism

Likelihood 4 out of 10

Middling Brown is pushed all week to make further concessions. Comes up with more next Monday so that party can put up united front in local and mayoral elections. Avoids Commons defeat.

Likelihood 8 out of 10

The losers Childless single people who do not qualify for the working tax credit; childless couples who lose twice from the income tax changes, but gain at most once from the working tax credit; the early retired, too young to benefit from the increase in tax allowance for those over 65

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