Yes, altering the length of the Panhard will move the axle, think you'd need to make it longer. This is pretty common on performance cars that use live axles. I have an adjustable Panhard rod on my Camaro, for just this purpose (although the adjustment is normally to shorten them, as most cars get lowered, rather than lifted).
But the big difference with a 4x4 is, you generally have a lot more suspension travel and if used off road will make use of this travel. Performance cars tend to have little travel in the suspension and aren't normally using all of the travel for road or track driving.
By making the Panhard longer you'll be moving the axle over. Say you increase the panhard by 1.5". However at full compression, such as off road, the longer bar will now be trying to push the axle a further 1.5" to the right than it would normally be. This might not be a problem, but it might induce binding or high lateral stresses on components in a manner that they weren't design for. Be it the trailing arms, the shocks or even the spring seats.
If you can find where someone else has done this on a p38 and had no problems then that would be good. If not, then you will be performing the R&D on this. Chances are it'll be fine, but if you start and get weird clonks off road, issues with how it drives or bits failing on the rear the suspension. Then such a change would be cause for further scrutiny,
As for why the axle moves. A rod, if one end is fixed, the other will move in an arc. When this end is attached to the axle, it will move the axle closers and further away as it goes up and down.
How you might extend it. There is cutting and welding, but it'll need to be strong and done well. You don't want an item like this failing out on the open road, as the axle will flop sides ways uncontrolled and likely result in a crash if you are going at any sort of speed.
Most adjustable ones have a screw linkage. You might be able to fabricate something, or even with some luck find one for another vehicle that just happens to fit the p38. It might also be worth checking some US sites, just in case someone over their sells such an item for the p38.
Failing that, you could just live with it. It isn't causing any harm, although to remain within the UK Construction & Use regulations, the tyres should not be protruding from the arches. It is a fineable offense. MoT's will probably be fine, but if you got pulled over...
