Ed Miliband is to put Labour at the head of a national revolt to kill off the chancellor's latest benefit cuts as church leaders and leading charities unite in protest against the assault on welfare.

In a high-risk move that could come to define his leadership, Miliband appears ready to order his party to oppose real-term reductions in income for millions of the poorest and most vulnerable, announced in Wednesday's autumn statement, when proposals are placed before parliament next month.

A senior figure close to Miliband said: "Make no mistake, we would come down very hard on people who milk the system but we will not confuse them with the vast majority of people – most of them in work – who are really striving, trying to pay the bills and put food on the table."

Senior Labour figures stopped short of confirming that Labour would vote against the cuts in the Commons in January. But it is understood that unless fundamental changes are made to the coming welfare uprating bill, Miliband will be prepared to give the order.

One senior Labour figure said there were still tensions inside the party, with a caucus of "new Labour" figures believing it will be politically suicidal to leave the party open to charges that it sides with "scroungers" and is in denial over the need to cut the benefits bill.

The Labour leader's move to stand up against what he regards as unjust and unfair treatment of millions of people comes as 59 charities and other leading organisations say in a letter in the Observer that the cuts will plunge many more children into poverty and put at risk the principles of the welfare state.

The group, which includes Oxfam, Barnardo's, the Children's Society, the Child Poverty Action Group, Disability Rights UK and Church Action on Poverty, says Osborne's plans to break the link between benefits and prices must be stopped if the welfare "safety net" – a cornerstone of the Beveridge report 70 years ago –is to be safeguarded.

They say: "While the chancellor paints a picture of so-called 'strivers' and 'skivers', our organisations see the reality on the ground: families scraping by in low-paid work, or being bounced from insecure jobs to benefits and back again."

They add that the cuts are "punitive, unfair, and must not happen".

Osborne used Wednesday's mini-budget to announce that he would increase benefits by just 1% for each of the next three years rather than in line with inflation, a move critics say will lead to benefits being eroded as they fall behind the cost of living.

In a clear attempt to cause political problems for Labour, which until now has been careful to give broad support for cuts to the welfare bill that have proved popular with the public, Osborne said the move would be confirmed in a bill to be put to parliament next month. While Miliband will know opposing benefit cuts carries risks, his supporters believe that a broad alliance of church groups and charities, backed by Labour, could change the terms of the national debate over welfare.

In an apparent swipe at Osborne, the archbishop of York, Dr John Sentamu, said "populist rhetoric" was not helpful. "Talk like this actually does a great disservice to those trapped in low pay who are going out to work every day to try to provide a better life for their families," he said.

Business secretary Vince Cable, who warns in an interview in the Observer that the economy is at risk of a "triple dip" recession, also has Osborne in his sights when he says ministers should not "insult" or "demonise" people on benefits, most of whom are out of work "through no fault of their own".

A report out in the next few days from Housing Justice, which co-ordinates support work across many denominations, calls for Christians who have spare rooms to consider offering them for rent at affordable rates to those in housing need.

But Miliband and Ed Balls, the shadow chancellor, condemn the cuts in Sunday newspaper articles.

Cameron and Osborne "showed they are not fit to govern because they played political games with people's livelihoods," the Labour leader wrote in the Sunday Mirror. In the Sun, Balls added: "Millions of struggling working families, striving to do the right thing, are paying the price for their failure."

Miliband believes that Osborne pushed ahead with the policy as part of a manoeuvre to embarrass Labour and insists he will not be cowed.

Rachel Reeves, shadow chief secretary to the Treasury, made clear that Labour would fight the cuts. "We need to get the benefits bill down, but the way to do that is to get the economy moving," she said.