Unclaimed funds from the working tax credit could be used to compensate those losing out from income tax changes, leading Labour rebel Frank Field has suggested.

The former minister made the proposal as the momentum behind his challenge to the scrapping of the 10p starting rate gathers pace.

Yesterday Mr Field’s Westminster office said an amendment to the finance bill calling for compensation had already attracted the support of 39 Labour backbenchers.

And, with ministers lobbying hard to push wavering Labour MPs ahead of the vote in the Commons expected on Monday, he has now unveiled a proposal on how to ensure those worse off as a result of the banding changes do not lose out.

“There is [an] unclaimed £1.2 billion in working tax credit, and [prime minister Gordon] Brown set up that credit specifically to help workers on lowish incomes,” he told the Guardian newspaper.

“Why can’t those monies be used to finance the compensation package for this year?”

Opposition parties have already pledged their plans to vote with Mr Field next Monday, having estimated around five million people will be worse off as a result of the changes.

Dave Prentis, general secretary of the Unison union, is launching a strong attack against the 10p rate abolition in a speech at the Scottish Trades Union Congress conference today.

Mr Prentis will tell delegates in Inverness he believes the move is a “body blow” to millions and says Mr Brown needs to do “the right thing” and offer immediate compensation.

The prime minister introduced the changes in the 2007 Budget, his last as chancellor, alongside a cut in the basic income tax rate from 22p to 20p and a tax credit expansion. The changes came into force earlier this month.

Mr Brown pointed to the Labour government’s record in the fight against poverty since 1997. Chief secretary to the Treasury Yvette Cooper told the Commons on Monday those losing out from the 2007 Budget were still on average £500 a year better off than under the 1997 personal tax regime inherited from the Tories.