The Prime Minister's spokesman said Mr Darling's statement would set out his "latest thinking" on the compensation package.

But he said full details would be revealed in the pre-Budget report in the autumn.

Mr Darling briefed ministers on his plans at the weekly meeting of the Cabinet at Number 10 during an hour-long discussion on the state of the economy.

The Prime Minister's spokesman described the mood of the meeting as "focused, business-like and determined".

Mr Darling has been under pressure to bring forward his proposals ahead of next week's crucial Crewe and Nantwich by-election.

The scrapping of the 10p rate was widely blamed for Labour's catastrophic performance in the local Government elections earlier this month.

Labour MPs fear the party's chances in Crewe - where it is defending a majority of just over 7,000 - could be damaged unless the Government can show that it is dealing with the issue.