Gordon Brown will increase the speed with which the Government compensates the 5.3 million "losers" from the abolition of the 10p tax band in the hope of heading off the threat of a new rebellion by Labour MPs.
Mr Brown will continue his fightback with tough new immigration rules today for non-EU migrants but senior ministers said the key to his survival is a package of compensation for the low paid who saw their tax double after the lowest tax band was scrapped last month.
Party sources confirmed Mr Brown will also ditch the "bin tax" on householders who fail to recycle their waste properly and shelve the delayed increase in duty on petrol in the autumn. He will back away from "green" taxes until the economy improves but the sources said he will not be reducing his focus on help to the poor in Africa.
Senior ministers have admitted they were too slow to react to the anger over the abolition of the 10p tax band which they say was the main cause of the beating voters handed out last week.
"We have to get the reforms in place as fast as possible. That is the only way to defuse the anger," said a cabinet minister. "The priority is to put together a package of compensation. We have gone through the past 10 years claiming we are the party of fairness and social justice. We have put that at risk, and we have got to put it back together as fast as we can."
Frank Field, the former welfare minister who led an earlier revolt on the abolition of the 10p tax rate, is threatening to trigger a fresh rebellion.
He is tabling a Commons motion today calling on the Chancellor, Alistair Darling, to clarify his earlier promises of compensation and has warned the Government that the rebels could disrupt the Budget legislation next month if they are not satisfied. The Treasury is considering increasing the winter fuel allowance and backdating it to April to deliver help for pensioners that are aged 60 to 64 who have taken early retirement.
Younger people could be helped with an increase in the minimum wage but that would upset employers who would have to foot the bill.
Mr Brown is planning to use a draft Queen's Speech next week to answer critics in his party who say they are not clear what he stands for. Insiders say the focus will be on the economy and aiding young people who need affordable housing.
The Prime Minister has already announced a target to build three million more homes including many for first-time buyers but he is being pressed to do more for families who cannot afford to buy.
Meanwhile, Mr Brown faced potential embarrassment when the International Development Secretary, Douglas Alexander, backed his sister, Scottish Labour leader Wendy Alexander, after she made what appeared to be a U-turn on the issue of a referendum on Scottish independence.
Having voiced her opposition back in March, Ms Alexander said at the weekend she had not ruled out a referendum. "I don't fear the verdict of the Scottish people. Bring it on," she told the BBC.
Mr Alexander said: "I have never feared an independence referendum because I'm in the mainstream of Scottish public opinion in wanting Scotland to stand tall but not to walk out of the United Kingdom."Reuse content