NEARLY 80 rebel Labour MPs defied Gordon Brown today when a Bill to give victims of the recession a £100-a-week boost in redundancy pay cleared its first hurdle.

Andrew Miller (Ellesmere Port and Neston) was among backbenchers who rejected government pleadings that the legislation would tip struggling firms into insolvency, by hiking the cost of laying off workers.

Instead, the MPs insisted that the current cap on statutory redundancy payouts - £350 a week for older workers - had miserably failed to keep pace with rising earnings.

The Statutory Redundancy Pay (Amendment) Bill, which was given a second reading by 85 votes to 17, would raise the limit in line with average earnings, rather than inflation.

That would mean a weekly cap of £450, if part-time earnings are included, or as high as £585 if linked to full-time salaries only. The TUC has argued for £500.

Although the Bill, sponsored by Labour backbencher Lindsay Hoyle, can probably be killed off later in committee, or on the Commons floor, today’s revolt raises the heat on the prime minister to act.

Ministers have made it known that they are willing to consider raising the cap, not least because there is a Labour manifesto commitment to do so.

But the vote triggered a furious response from business groups, who insisted higher redundancy pay would put even more jobs at risk.

David Frost, director general of the British Chambers of Commerce (BCC), said: "This is the wrong time to be contemplating a large increase in statutory redundancy pay. Businesses are already having cash-flow problems and this will simply add to that."