Alistair Darling is to consider raising income tax allowances to take more poorly paid people out of paying tax as a way of defusing the crisis over the abolition of the 10p rate.

As 40 Labour MPs signed up to a rebel amendment to the Finance Bill aimed at compensating those who lost out because of the decision taken in Gordon Brown’s 2007 Budget, the Chancellor hardened up his promise that action will be taken in the autumn Pre-Budget Report to soften the blow.

At a private meeting of Labour’s backbench finance committee yesterday, Mr Darling promised at least three times that any changes he made would take effect in this financial year. His remarks pleased the 60 or so potential rebels and other concerned backbenchers who attended, but the Chancellor made plain that at this stage he was unable to do more to flesh out any proposals that might be drawn up.

At what was described as a constructive meeting, one MP after another told him that they needed to have more substance to put to the voters before next week’s local and mayoral elections.

The rebel amendment tabled by Frank Field would in effect delay the implementation of the 10p abolition (which in any case has already taken place) until measures had been taken to compensate those losing out, mainly childness couples, single parents and pensioners. Mr Field says that his plan would cost about £700 million.

Some of the MPs are calling for any changes to be backdated, or retrospective, words with which the Treasury is uncomfortable.

The Chancellor is believed, however, to be looking seriously at the case for raising the starting threshold for income tax by lifting up the personal allowances. Such a move would not help all the losers, but it would be the simplest way of dealing with a big proportion of them. Depending on how far he raised the allowances, the cost would be containable, but could still run into several hundred million pounds.

The Times has been told that because Mr Darling has promised that any changes would take place this financial year, such a move would be backdated in effect because people would have their income tax codes changed and any overpayment of tax for the whole year would be made good.

As Mr Brown and Mr Darling tried to head off a crippling revolt yesterday, the Treasury Select Committee announced that it would be holding a swift inquiry into the impact of the decision to abolish the 10p rate.

When the Field amendment is debated on Monday, ministers will promise to take any recommendations from the committee into account, which may also help to persuade some MPs to take their names off the list of rebels. Crucially the committee will conclude its investigation before the report stage of the Finance Bill.

Treasury sources said that all options were on the table and no details had been decided. After the meeting Mr Darling said that it had been “very useful”.

Earlier the Prime Minister’s spokesman said that the Chief Whip, Geoff Hoon, had told ministerial colleagues that it was “important that all ministers in Cabinet explained to those who had concerns what the Government’s position was”. But he again refused to say whether Mr Brown saw the tax issue as a “confidence vote”, simply describing it as important.

The spokesman said that the Government would be “working hard during the course of the next week to persuade MPs of the merits of its case”.

At present there are more than enough Labour MPs signed up to Mr Field’s amendment to defeat the Government. But ministers are hoping that as the promise of help later in the year is explained many of them will be persuaded to withdraw their names and avoid going into the lobbies in a division that could strike a massive blow to Mr Brown.

— Gordon Brown faced a growing revolt last night over plans to detain terrorist supects for more than 28 days without charge after the former Attorney-General gave warning that the measure would incite young Muslims to “take up arms” (Frances Gibb writes).

Lord Goldsmith, QC, who served under Tony Blair and left the Government less than a year ago, said that plans to extend the 28-day limit to 42 days were not necessary or proportionate and did not contain adequate safeguards.

He said: “I’ve got a worry that some young men will see this as a justification for taking up arms.”

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