The government stands accused by a leading Tory thinker of creating a “country for older generations” in which pensioners benefit from constantly rising incomes while the young, their families and children pay the price of punishing policy decisions, including cuts to their tax credits.

In a hard-hitting intervention on the eve of what is expected to be a tempestuous House of Lords debate over plans to slash the incomes of millions of low-income families, former Conservative minister and prominent party intellectual David Willetts says the current policy mix is manifestly unfair and breaks the supposed “social contract” between generations.

Willetts, a highly respected figure who left parliament at the May election and now heads the independent Resolution Foundation thinktank, says in an article for the Observer that the fruits of prosperity are not being shared across age groups but rather pumped excessively into making the lives of pensioners more comfortable. “The decline of pensioner poverty is good news,” Willetts argues. “But not enough of it is a story of wider prosperity enjoyed by everyone. Too much is a specific generation benefiting in an unrepeatable way. Some is a deliberate decision to help people above a certain age and so younger people might hope one day to gain, but even here we can ask if it really is the best use of limited resources.

Pensioners prosper, the young suffer. Britain’s social contract is breaking | David Willetts Read more

“We are reshaping the state and storing problems for the future by creating a country for older generations. The social contract is a contract between the generations and in Britain it is being broken.”

Willetts first explored the theme of intergenerational unfairness in a book, The Pinch, published in 2010, but the timing of his latest broadside against David Cameron and George Osborne will infuriate the Tory high command. It will also stoke growing concern in Tory ranks that tax credit cuts could be this government’s poll tax, and embolden peers to try to force the chancellor into a U-turn in the crucial vote in the Lords.

A group of 63 crossbench, Liberal Democrat and Labour peers, in a letter to the Observer, say that rises in the national minimum wage will not be enough to prevent working families with children losing out. “At a time when nearly two thirds of children living in poverty are in working families, none of this can be right.” The list includes 13 crossbenchers, two of whom are former archbishops of Canterbury, Rowan Williams and George Carey.

The peers call on Osborne to revisit the tax credit policy. A motion tabled by Labour peer Patricia Hollis will call on ministers to examine the impact of the cuts on families with a view to putting in place transitional arrangements to protect the worst-off over the next three years.

Willetts spells out how the tax credit cuts for families contrast with rising incomes of pensioners, who are enjoy protection from the so-called triple lock which ensures their pensions rise year on year. “What does this mean for households? Well, a pensioner couple with an income of around £15,000 can expect it to rise by roughly £300 as a result of the triple lock. This contrasts with Resolution Foundation estimates of a loss from tax credit cuts of around £1,500 for a family with one child in which a single-earner brings in that same £15,000 (and that’s even after accounting for the welcome rise in the minimum wage promised by the chancellor).”

Matthew Reed, the Children’s Society’s chief executive, said it was “now clear that low-income families with children will be the biggest losers from these unfair cuts.

“Parents will no doubt do what they can to shield their children from the impact but the reality is that tax credits are vital for poorer families who work long hours to provide the basics for their children. Cutting their income in this way, by more than £1,000 a year in many cases, will damage children’s lives, as well as undermining incentives to move into work or earn more.”

Treasury sources insisted that Osborne had no intention of backing down over tax credits, although Tory MPs believe he may act to soften the blow for the poorest families in his autumn statement on 25 November.

Labour, which has united around opposition to tax credits, will set up another two votes in the Commons this week, should the Lords fail to block or delay the cuts. MPs will also be asked on Tuesday to block the changes and, if that fails, to support an amendment which would pause any cuts until an assessment of their impact is laid before parliament.

Owen Smith, the shadow welfare secretary, said those Conservatives who had voiced doubts over the chancellor’s reforms should now “do something meaningful” and support Labour’s amendments.

He said: “On Monday, the House of Lords will vote on the Tories’ devastating tax credit cuts, in the face of attempts to bully them in to silence.

“Now on Tuesday MPs will also have another chance to reverse the cuts to tax credits, provided Tory MPs are brave enough put aside party divides and vote in the interests of low- and medium-paid families.

“It’s not too late for us to avert this disaster, but time is running out. The moment has come for Conservative MPs who have spoken out to do something meaningful.”

• This article was amended on Sunday 25 October 2015 to correct the spelling of Matthew Reed’s surname.