GORDON BROWN was warned last night that he faced a second election disaster unless he made further concessions in the row over the abolition of the 10p income tax band.

In the wake of Labour’s worst local election performance in 40 years and Boris Johnson’s historic triumph in London, the prime minister has been told that he now faces Labour’s first by-election loss to the Conservatives for 30 years.

Amid signs of Brown’s weakening authority, his party delivered the blunt message that unless he improves his performance by autumn, he could face a leadership challenge. One Labour minister said Brown had received a “final warning from the British people”.

Brown is meeting advisers at Chequers this weekend to devise a “relaunch” aimed at seizing back the political initiative. The prime minister and his aides are drawing up an urgent rescue strategy focused on restoring his reputation on the economy.

Among the sweeping changes being discussed are the scrapping or delaying of unpopular tax rises, including the planned 2 per cent rise in fuel duty due this autumn, and controversial rubbish taxes.

The Treasury is not ruling out an emergency statement on the economy to highlight the plans before the summer recess.

In television interviews today Brown is also expected to address public anger over food prices, promising to ensure supermarkets do not break competition laws.

Cabinet ministers were yesterday engaged in a mass ring-round of panicking backbenchers to shore up Brown’s sinking support.

Many are openly voicing concern that Labour cannot win the next general election while Brown remains in charge.

The prime minister will face further assaults from Labour critics this week as MPs return from the bank-holiday break to take stock of the party’s electoral humiliation.

Frank Field, who led the successful revolt against abolition of the 10p income tax band, which penalised millions of low-paid workers, warned that Labour would now be defeated in this month’s by-election in Crewe and Nantwich unless Brown issued urgent clarification on the tax issue.

Two weeks ago Brown promised he would compensate groups who lost out from the tax changes, but failed to provide details of the new benefits package. The lack of a clear statement left core Labour supporters confused and worried, prompting many to stay at home or vote Tory last Thursday.

Now the Labour rebels are to renew the pressure on tax by putting down a Commons motion on Tuesday calling for Brown urgently to issue details of the compensation package for low earners.

Field, a former welfare minister, said: “I find it incomprehensible that he cannot get a few sentences put together saying,

‘I am going to move every muscle in my body to find ways of making the package as comprehensive as possible and every bit of it will be backdated to April 5’.”

The last time the Conservatives took a Labour seat in a by-election was at Ilford North in 1978, a harbinger of their 1979 general election victory. They have not gained a single parliamentary seat in a by-election since 1982.

In the by-election on May 22, triggered by the death of Gwyneth Dunwoody, Labour is defending a majority of 7,078. In the past this would have been considered a safe seat, but Field says Labour will lose unless Brown acts fast.

“One of the big questions that the candidate will be asked is: what is the policy on 10p? And what is the candidate going to say?” Field said.

Downing Street sources said there were no current plans to give in to Field’s demand.

A draft Queen’s speech to be published this month is expected to include a new system of incapacity payments encouraging claimants to look for work, and to extend GPs’ surgery hours.

Few MPs want Brown to quit now, but if the party’s position deteriorates by the time of the annual conference in September, a leadership challenge will become more likely. Greg Pope, MP for Hyndburn, said: “Gordon is going to have to get his act together, otherwise things could be very different by the autumn.”

Ivan Lewis, the junior health minister, said voters had “plunged a dagger into the heart” of the Labour party, while John Denham, the universities secretary, said Brown faced an uphill struggle to appease “southern discomfort”.

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