Bristol East Labour MP Kerry McCarthy is leading a campaign by more than 110 Labour MPs – and backed by senior members of the Cabinet – to have benefits or tax credits increased for poorer families.

Chancellor of the Exchequer Alistair Darling is reportedly preparing to channel cash to poorer families in his budget next month.

In an open letter organised by Ms McCarthy and published by a Sunday newspaper, the MPs argue that giving tax cuts to the middle classes may simply see money put in savings accounts. Instead, they say, giving cash to those who really need it ensures they will spend it.

Prime Minister Gordon Brown is trying to broker a £100-billion deal at this week's G20 summit to stop the world's poorest falling victim to the banking crisis by extending loans and aid to developing countries that are at risk of poverty, disease and conflict.

Meanwhile, the Chancellor is said to be taking the MPs' idea seriously.

A Treasury spokesperson said: "Mr Darling is very focused on taking whatever measures are possible to kick-start the economy and put money where it is most needed."

Ms McCarthy, who is a ministerial aide to Douglas Alexander, the international development secretary, said: "This is about getting across the message that if you are going to be spending money, it should be going on those who need it. It's about people who have to budget very carefully and, if they do have a little more money coming in, that might mean a pair of shoes for a child. There's a consensus that if Labour can't be about this, what are we about?"

Ms McCarthy organised a similar letter last year, which was signed by 70 Labour MPs. This year she said: "It is great that so many Labour MPs came together to demonstrate their concern for the one in three children in the UK who are living in poverty.

"I hope the government takes note of the strength of feeling on this issue within the Labour party."

The MP's work in this area has also resulted in her being awarded Child Poverty Action Group MP of the Year.