Treasury’s coffers to resolve a standoff with the House of Lords over his proposed cuts to tax credits.

George Osborne is prepared to dig deep into the

 As a growing number of ministers warn in private that the government has been damaged by its apparent insensitivity to low-paid workers, the chancellor embarked on the first stages of a change of tack. A senior government source said the chancellor had given himself “wriggle room” in his original deficit-reduction plan that will give him the space to divert substantial resources to “lessening” the impact of the tax credit cuts. Osborne, who will outline his plan to soften the impact of the planned cuts when he delivers his autumn statement on 25 November, told MPs he would seek to help low-paid workers. There will be a particular focus on helping people in the transition period between the introduction of the “national living wage” and its full impact on earnings. Analysis How George Osborne got himself into a fix over tax credits Read more The chancellor told MPs: “We will continue to reform tax credits and save the money needed so that Britain lives within its means while at the same time lessening the impact on families during the transition.” The government adopted a tough strategy in public as Treasury officials started to draw up changes to the tax credit plans that are designed to defuse the row with the House of Lords and to reassure Conservative MPs in marginal seats who have voiced concerns about the impact on lower earners. Many ministers say the chancellor has struggled to provide an adequate answer to the warning by the Institute for Fiscal Studies (IFS) that 3 million families will be worse off by £1,000 a year. Osborne adopted a robust approach in the Commons when he said he was determined to reduce the reliance of low-paid workers on tax credits. He told MPs: “I will set out the plans in the autumn statement. We remain as determined as ever to build a low-tax, low-welfare, high-wage economy that Britain needs and the British people want to see.” Downing Street also made clear that it is spoiling for a fight with the upper house when it announced that Lord Strathclyde, the former Tory leader of the Lords, would lead a review to avoid a repeat of the vote on Monday night. The former Labour social security minister Lady Hollis forced a delay to the tax credit cuts after peers voted for her motion calling on the government to outline a package of compensation for low-paid workers. The Guardian view on the tax credits defeat: good use of peer pressure Read more Downing Street said the votes – another motion by the crossbencher Lady Meacher was also passed – broke the constitutional convention that the upper house does not block or delay financial measures.