The Prime Minister has made an embarrassing U-turn over cries to abolish the 10p tax rate, pledging to compensate more than five million people who forked out more in tax.

The government refused to be moved on its position for weeks – but Gordon Brown announced the dramatic change during a House of Commons session.

The moves came on the back of signs that Brown was sure to lose his first Commons vote since becoming Prime Minister last summer.

The two groups hit by the tax, low paid workers with no children and pensioners under 65, are both to be assisted in separate ways.

The pensioners are set to get changes to the winter fuel allowance, backdated to April, will be aided by changes to the working tax credit.

Government has also tasked the Low Pay Commission to look at adjusting the minimum wage regime to better assist younger workers.

Further reading:

PM tries to calm troubled tax waters