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Business Secretary Vince Cable said his Liberal Democrat colleague Sarah Teather was right to warn plans for a £500-a-week cap on household benefits could have "very serious social consequences", but he defended the need for such a cap.
Mr Cable said it was required to prevent housing benefit "escalating out of control" but had to be accompanied by an increase in the provision of affordable housing.
"What is immoral, and I have read her article carefully, is demonising poor people," he told BBC1's Andrew Marr Show.
"We have got to cap the housing benefit element while at the same time increasing the supply of affordable housing," the Business Secretary continued.
"That is absolutely critical because without that you will have very serious social consequences which Sarah has quite rightly warned about."
A spokesman for Iain Duncan Smith has accused ex-Liberal Democrat minister Sarah Teather of scaremongering, following her criticism of the government's benefit plans.
"The criticisms Sarah Teather is levelling against the Government's welfare reforms are hugely misinformed and therefore result in needless scaremongering," he told the Observer.
"It's not fair or right that benefits claimants receive higher incomes than hard-working families who are striving to get on in life. Our reforms bring fairness back to the system while ensuring we support the most vulnerable."
Former children's minister Sarah Teather has criticised plans for a £500 per week cap on household benefits as "immoral".
Speaking to The Observer, she said: "I think deliberately to stoke up envy and division between people in order to gain popularity at the expense of children's lives is immoral.
"It has no good intent.
"There are all sorts of things you have to do when times are tight that have negative consequences but you do them for good purposes.
"But to do something for negative purposes that also has negative consequences - that is immoral."