Brown faces backbench rebellion if he fails to slap windfall tax on utility companies

Gordon Brown was scrambling to head off a Labour rebellion last night by holding out the prospect of a raid on the rising profits of energy companies.

More than 70 MPs have put their names to calls for a windfall tax, which would fund a hand-out to families struggling with rising food, fuel and housing costs.

The Prime Minister has ruled out a repeat of the £5billion levy introduced by Labour in 1997, to pay for the New Deal, a scheme to help the young off the dole and into work.

But ministers have suggested that they are looking at ways to help families cope with high prices. And the Treasury let it be known that it is keeping all options open as it looks for ways to raise revenue.

Government sources say a windfall tax is not on the cards as it was not mentioned in Labour's 2005 election manifesto - a key requirement. Mr Brown also fears companies would pass the cost of the tax on to customers through bills.

But the Chancellor, Alistair Darling, is looking at other ways of making energy companies pay.

They could be asked to volunteer some of their profits for schemes to help the elderly and poor cope with higher heating costs this winter.

The Treasury is also looking at increasing by £500million the amount the companies must pay for carbon credits, under the European carbon trading scheme.

Evidence that more than 70 Labour MPs have backed a Leftwing petition suggesting the move, appear to underscore the political difficulties Mr Brown faces as he returns from holiday. He is due back this week to put the finishing touches to an autumn relaunch.

A petition organised by Left-wing Labour group Compass has been signed by several Government members, including Stephen Pound - aide to welfare minister Stephen Timms.

Labour MP Clive Betts said there was 'overwhelming' support for a one-off tax among his parliamentary colleagues. Companies were enjoying 30 per cent increases in their profits, he said. '

But David Porter, of the Association of Electricity Producers, warned that a windfall tax could drive investors away from the UK.