A wealthy Conservative minister provoked anger last night after questioning the connection between the soaring use of food banks and the Government’s squeeze on benefits.

Lord Freud, a Work and Pensions minister, insisted that the recent sharp increase in people resorting to food handouts to feed their families was not necessarily linked to benefits sanctions or delays. He suggested more people were taking charity food because more food banks existed – and he prompted Opposition jeers in the Lords when he denied they were effectively a part of the welfare system.

Challenged by the Bishop of Truro, the Rt Rev Tim Thornton, over whether ministers conceded a link between the benefits system and food bank use, Lord Freud replied that it was difficult to “make the causal connections”. The minister for welfare reform added: “It is difficult to know which came first – supply or demand.”

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Later, Lord Freud, a former investment banker, came under fire from charities for being out of touch with the reality of life on the breadline. Campaigners recently warned that more than 500,000 Britons were using food banks because of a combination of benefit cuts, falling wages and the economic downturn.

Chris Mould, the executive chairman of the Trussell Trust, which runs 325 food banks, said: “The only people who seem unable to accept there is a social crisis driven by the cost of living is the Government.”

Critics have claimed a government plan to require benefit claimants to wait seven days before being able to apply for state support would increase reliance on food banks.

However, Lord Freud told peers: “Food banks are absolutely not part of the welfare system that we run. We have other systems to support people.” Asked what he meant, he replied: “If you put more food banks in, that is the supply. Clearly food from a food bank is by definition a free good and there’s almost infinite demand.”

A joint report by Oxfam and Church Action on Poverty five weeks ago said that the number of people using food banks has trebled in the past year alone. They said cuts to welfare payments, including below-inflation benefit rises and new Jobseekers’ Allowance sanctions, had fuelled the increase.

Last night, Chris Johnes, director of Oxfam’s UK poverty programme, said: “These comments don’t bear much relation to the reality. The fact is that food banks are stepping in to fill a gap left by the welfare system.” He added: “The evidence is very clear that people are going to food banks out of real need. They feel a sense of stigma that they can’t feed themselves and their families.”

Mr Mould said 30 per cent of people were referred to it because of benefit delays and another 15 per cent because of benefit changes. He said: “It’s absolutely clear there is a growing demand for emergency food supply. That is the consequence of a growing problem with people making ends meet... there is lots of evidence to that effect. The only people who seem unable to accept there is a social crisis driven by the cost of living is the Government.”

Liam Byrne, the shadow Work and Pensions Secretary, said: “These comments show just how out of touch this Government is. The welfare revolution we were promised has failed. Unemployment is up, the benefits bill is soaring £20bn higher than planned, and food banks are growing by the day, yet the only ones getting any extra help from this Government are millionaires.”

A DWP spokesperson said: “We welcome the contribution voluntary organisations and food banks play in supporting local communities, beyond the safety net provided by government.

“That is why Jobcentre Plus – for the first time – is now referring people to their services. Our welfare reforms will improve the lives of some of the poorest families in our communities, with the universal credit simplifying the complex myriad of benefits and making three million households better off.”