Alistair Darling faces new backbencher challenge over 10p tax compensation

Gordon Brown was last night facing another damaging clash with Labour MPs over the 10p tax rate.

More than 20 rebels will this week try to force the Government to help those left out of an emergency compensation package last month.

But the Prime Minister is refusing to give way to demands for more than one million workers to get their money back.

There is also growing pressure on the Government to make clear that the compensation being offered this year is not a one-off.

Mr Brown's spokesman said: 'We set out our proposals for this year, which cover the losses of 80 per cent of those who are affected and halve the losses of the remaining 20 per cent.'

Chancellor Alistair Darling defused a Labour rebellion last month after MPs threatened to block the finance bill.

He unveiled an emergency £2.7billion mini-budget to compensate 80 per cent of the 5.3million households that lost out from the abolition of the 10p tax rate.

He borrowed the sum to increase personal allowances by £600 to £6,035 for this financial year for those paying tax below 40 per cent.

But privately, some ministers are concerned that not all the losers had been compensated.

Labour MPs say all of those hit by the scrapping of the 10p rate must be compensated in full.

David Taylor, the Labour MP for Leicestershire North West, is understood to have the backing of 22 Labour MPs for an amendment demanding that Mr Brown should compensate the remaining 1.1 million people.

It would introduce a taper mechanism into the £600 increase in personal allowances offered by the Chancellor, which would ensure that all of those who lost out from the 10p rate cut would get their money back.

Mr Taylor, who was having emergency talks with Mr Darling last night to try to resolve the dispute, said it would cost the Treasury around £66million.

'It's only a small amount but to people that are hard up against it, it is not an insignificant figure,' he said.

Separately, Labour MPs Lynne Jones and Michael Meacher have tabled an amendment that would allow individuals to opt in to the 10p rate, allowing anyone disadvantaged by the change to stick with the old rates.

Both proposals could be discussed in the Commons as early as today.