Mr Clarke was last night refusing to back down over the principle of taxing executive share options. But there could be attempts to phase in the tax on shop-floor employees to avert the threat of a government defeat. In a more conciliatory approach, ministers said they had called Sir Richard Greenbury and his committee to the meeting to "listen to what he has to say".
A possible solution was put forward by Sir Michael Angus, a member of the committee. He said the Chancellor "should consider whether at the lower levels there are things that should be done, or transitional periods that should be allowed". He added: "The change does not take place until the Finance Act so there's plenty of time to listen and see if some adaptations in the transitional period might be appropriate."
Mr Clarke has invited Michael Jack, Financial Secretary to the Treasury, a former Marks & Spencers manager, to the meeting with Sir Richard, the chairman of the store group, to help to smooth the way.
The Chancellor invited Sir Richard after discovering that the Greenbury committee had been reconvened to discuss the row over its recommendation to tax share options, which Sir Richard disowned before a select committee last week.
Whitehall sources said the Chancellor thought it better to invite the committee to hear its views rather than to exchange further letters. It is clear Mr Clarke feared the exchanges were getting out of hand. The shadow Chancellor, Gordon Brown, said: "This new confusion and disarray looks like the first stages of yet another U-turn.
"After a week of bungling it appears the Treasury now want to receive new advice before drawing up the detail of their proposals. No one will ever trust the Chancellor with their tax affairs again."
The threat of a government defeat on the Finance Bill increased when John Prescott, the deputy leader of the Labour Party, confirmed Labour would take the opportunity of the Finance Bill in the autumn to force a vote against the measure.
David Shaw, the Tory MP leading the campaign to reverse the tax plan, said it could lead to a defeat like the Government "debacle" over VAT on fuel, unless Mr Clarke relented.
Archie Norman, chief executive of the Asda supermarket group, yesterday threatened a lobby of MPs by 36,000 staff who have share options if the Chancellor refused to backtrack.
Leeds-based Asda recently issued options to staff. Those taking them up now face a tax bill of at least 25 per cent on any gains following the Chancellor's imposition of income tax.
Mr Norman, who 10 days ago made an instant pounds 1.3m profit for himself from options, said: "The effect of the Chancellor's change is to knock schemes such as ours on the head. For senior executives ... it makes not one penny of difference, but for more junior executives and store workers it really makes the scheme not worth while."
Sir Desmond Pitcher, the chairman of privatised North West Water who has been attacked over the level of his pay, said the privatised utilities had been singled out by the Greenbury committee for political reasons.