One of the UK's greatest municipal libraries has been accused of throwing away valuable parts of its archive because of an unexpected shortage of space in a huge £170m restoration and modernisation.

The charge, which is being circulated to national decision-makers and spread on social media, is strongly denied by Manchester city council, which has deplored "hysterical rhetoric' over the issue and views the project as a "world-class" improvement to the 1930s masterpiece.

The domed central library stands next to Manchester town hall, a symbol of hope during the Great Depression, with a vast circular inscription from Proverbs exhorting citizens to "exalt wisdom and she shall promote thee". It is closed for the three-year modernisation which is due to finish next year, and previous concern has been voiced over plans to dispose of some 300,000 items from its collection during the process.

And now, a strongly worded letter, which purports to be from a source within the library, claims that the process has become "cultural vandalism on an industrial scale". It suggests that normal "weeding" processes undertaken by all libraries have been accelerated and given to non-specialist staff, "many of whom feel uneasy about what they are being asked to do".

Those involved are not prepared to speak openly but say that inaction would risk "the destruction of a large proportion of the very thing that makes Manchester Central Library unique amongst British public libraries – its extensive and historic reference stock". Manchester's head of libraries Neil MacInnes responded to say that the accusations are false and that staff sifting material are at pains to "always err on the side of caution".

The material at issue consists of reference and non-fiction items published after 1850, which are being pulped for recycling, offered to other institutions, or sold. MacInnes says: "Examples include outdated scientific or medical reference books, some periodicals, duplicates such as paperbacks that we have in hardback, or books in such poor condition that it wouldn't be cost-effective to repair them.

"But the idea that the library will lose valuable stock is plain wrong. A dedicated team of library staff, many of whom have worked in Central Library for most of their careers, are currently involved. The library has recorded use of material since opening in 1934 and it has become clear that a large number of items which had been added through time have never been used. Recent changes in technology have also ensured that many items are now available electronically."

The protesters claim that this underestimates the threat to rare and in some cases unique books and periodicals, such as collections by Manchester poets and other local material which could be invaluable to future researchers and is available nowhere else. One of those involved with the circular, speaking on condition of anonymity, says: "Perhaps the worst thing is that we don't know what is going and what has gone. They have got caught out by not having enough space, a problem which was raised more than a year ago. The library is merging with the County Record Office and that's bringing in a whole lot more material. There just isn't enough room."

The library confirmed that new archive material would take up an extra 8km of shelf space, additional to the main collection which has been temporarily housed in salt mines in Cheshire. But MacInnes says: "The brief to the architect was never about replacing like with like. In the past, there was a tendency for libraries' collection policies to focus on quantity rather than quality, amassing material almost indiscriminately. The transformation of the Central Library is allowing us to carry out a much-needed housekeeping exercise, ensuring that the collections are relevant to a 21st-century library."

Concern has spread to past researchers in the stacks, including the children's writer Melvin Burgess, whose novel Junk won a Carnegie medal and the Guardian children's fiction award in 1997. He said that he had been contacted by the protesters and sent the circular, and was aghast at the possible effects of the pulping. "We need to know more about the criteria being used and what records are being kept. Even if these suggestions are only borne out in part, it would be appalling."

Mark Taylor of the Chartered Institute of Library and Information Professionals said that very large disposals were unusual and circumstances varied from case to case. Many libraries had "an awful lot of material sitting in basement stacks" but standard weeding practices involved assessing each item and whether there was "the right fit for it to have an alternative home".