ACTION to compensate households who lose out from the abolition of the 10p income tax rate will take effect within this financial year, Chancellor Alistair Darling promised Labour MPs.

The move was being seen as a further concession to backbenchers threatening to rebel in Monday's crunch Commons vote on the Finance Bill.

However, sources close to the Chancellor insisted it was simply a "clarification" of his earlier pledge to tackle the issue in this autumn's Pre-Budget Report (PBR).

As Mr Darling began a series of meetings designed to win over potential rebels, it was announced that an influential committee of MPs would investigate the impact of scrapping the 10p rate on Britain's poorest households.

The cross-party Treasury Select Committee intends to complete its inquiry and produce a report including recommendations for action before the Bill reaches the final stage of its passage through the Commons.

Some 39 Labour MPs have signed a rebel amendment tabled by former minister Frank Field which would delay the implementation of the tax change until measures were in place to compensate the 5.3 million people who may lose out.

And many more on the party's backbenches have expressed concern over the impact of the change on low-income households, raising the very real prospect of a Government defeat if the issue is forced to a vote.

Downing Street said that ministers would be "working hard" to persuade MPs of the merits of the change, which was announced in Mr Brown's final Budget as Chancellor last year.

And there were indications the charm offensive, which began with a conciliatory address to the Parliamentary Labour Party by the Prime Minister last night, may be having an effect.

Keighley MP Ann Cryer, said: "While I have signed Frank Field's amendment, I am very hopeful it won't be needed.

"I got the strong impression that the Prime Minister and Chancellor were really listening to the concerns raised by MPs."

There was speculation in Westminster the announcement of the Treasury Committee inquiry may encourage some would-be rebels to hold their fire.

MPs may choose to wait until they have seen the committee's report - and ministers' response - before deciding whether to vote against the Government, rather than inflicting a highly-damaging defeat on Mr Brown ahead of the May 1 local elections in England and Wales.

Mr Brown's spokesman declined to say whether the Prime Minister would regard the vote on Mr Field's amendment as a matter of confidence in his premiership.

But he acknowledged that the division on the Finance Bill, which implements the decisions made in the Budget, was "an important vote".