Deputy Prime Minister Nick Clegg has defended plans for a three-year benefits squeeze as he faced party dissent among his own MPs ahead of a key Commons vote.
At least two Liberal Democrat MPs have said they will rebel by opposing a 1% cap on most working age welfare payments and tax credits - a real-terms cut. Another warned that a "large number" were opposed to the measure, which is aimed at slashing £5 billion from the welfare bill over the next five years.
Ministers say the cap is needed because it is unfair that state handouts have been rising twice as fast as wages during recent years of austerity.
Labour is voting against the legislation ending inflation-linked rises, pointing to analysis showing seven million working households will lose out by an average £165 per year, and tensions within the coalition have been inflamed over complaints George Osborne and other top Tories are demonising the jobless as "shirkers".
Mr Clegg openly criticised that approach on Monday but - at a joint press conference with Prime Minister David Cameron - defended the imposition of a cap.
Analysis of the Welfare Benefits Up-rating Bill by the respected Institute for Fiscal Studies (IFS) found half of working-age households with someone in work would be affected in some way. The average loss would be £165 a year for seven million families - compared with around £215 for the 2.5 million workless households hit by the cap, it said.
Anti-poverty campaigners have warned that families will increasingly struggle to properly feed children if benefits fail to keep pace with rises in the cost of living.
Former children's minister Sarah Teather was the first to break ranks, warning the measure would make poverty "significantly worse" and accusing Mr Osborne of "playground politics".
She was joined in saying they would rebel by South Manchester Liberal Democrat MP John Leech who said he found the Tories' language "objectionable". "I strongly support raising the tax threshold for low paid workers, but this cut will wipe out much of that good work," he said ahead of Tuesday evening's Second Reading division.
A Labour attempt to block the Bill and instead calling for a compulsory jobs guarantee for the long-term unemployed was defeated by 328 votes to 262, a Government majority 66.