Gordon Brown wants to head off growing demands for a windfall tax on energy companies’ profits by increasing the amount that they must pay for pollution permits.

Mr Brown flies back to Britain today to mounting pressure to fund fuel subsidies for poorer households with a one-off tax on the profits of oil and energy companies. He also faces criticism from business leaders over the level of tax faced by companies.

More than 70 Labour MPs have signed a petition to demand a windfall tax, according to campaigners determined to ensure that the issue dominates the party’s annual conference next month. But both Alistair Darling, the Chancellor, and John Hutton, the Business Secretary, oppose taxing the companies’ profits in such a way, arguing that it would damage investment and could lead to higher household bills.

Mr Brown, weakened by continuing speculation over his future, wants ministers to consider an alternative method of raising funds from the power companies. Companies would have to pay more for so-called emissions permits, created as part of the European Union’s carbon trading scheme, under the plan being studied by Treasury officials, The Times has learnt. Initially, the permits were free but ministers announced proposals recently to auction 7 per cent of them — a measure that could raise £2 billion over four years. The latest plan would increase that figure to 10 per cent bringing in a further £500 million.

The money would help to fund a package of help for food, fuel and housing costs for poorer households expected to form the centrepiece of Mr Brown’s efforts to restore his political fortunes this autumn.

Mr Brown is certain to face demands for a windfall tax when he attends the TUC conference next month. An opinion poll in The Observer newspaper found widespread support for the move — 67 per cent of those surveyed strongly agreed or agreed with the proposal.

Ministers believe that the likelihood of an early challenge to Mr Brown has lessened over recent weeks and he is not now expected to reshuffle his Cabinet until after Labour’s conference in the third week of next month. But he has been unable to shake off questions about his leadership, which dogged him even in Afghanistan and have continued in China. Pressed by Sky News if he was confident that he would still be in a job by Christmas, the Prime Minister replied: “Of course.”

The Prime Minister also faced pressure from the business sector last night when Miles Templeman, Director-General of the Institute of Directors, criticised Mr Brown’s first months in No 10 and hit out at the “unacceptably high” level of corporation taxation. He said in an interview with the Financial Times: “The Government, in the past five years particularly, has not really embraced the business agenda thoroughly enough. The Brown premiership has carried on that trend. And then you’ve got all the economic pressures and some of the tax cock-ups as well.”

Warning against any moves to make up political ground by raising taxes at the expense of business, Mr Templeman added: “In reality, there is very little room to move fiscally.

“I hope we don’t get into a year of small-scale electioneering, rather than addressing the bigger picture of how we’re going to compete for the next ten years.”

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