Britain has begun to develop an "absolutely toxic public opinion" on immigration, Vince Cable said on Tuesday.

In a significant intervention, the business secretary said the coalition must be careful not to "inflame" attitudes with anti-immigration policies.

Cable said the opinion of voters was making it increasingly difficult to make an "economically rational" argument in favour of immigration.

His remarks appear to be a warning to David Cameron against going too far with his proposed crackdown on "benefit tourism". Earlier this year, the prime minister pledged to stop foreigners "abusing" British public services against a backdrop of hardening public attitudes against immigration and increasing support for Ukip.

Speaking to the Liberal Democrat conference in Glasgow, Cable directly criticised proposals to hit immigrants with extra charges for using the NHS and bring in stricter visa controls.

"The phrase illegal immigration is a kind of catch-all for things people are uncomfortable with in this immigration debate," he said. "We are dealing with an absolutely toxic public opinion. I think it's important that we keep calm and do nothing to inflame public opinion."

Cable said his own party is also wrestling with the issue at a time when immigration is the second biggest preoccupation of the electorate.

"We are a political party trying to come to terms with this. We are a liberal party economically and socially. The natural instincts of our party are to be liberal-minded and rational where immigration is an issue," he said.

"But also we see these surveys which show that it is number two in everybody's political preoccupations after the economy and even among people who are our natural supporters it is number two – they invariably have very negative views. You can't ignore your constituents."

The comments are yet another controversial intervention by Cable, who revealed on Monday that he could resign from the cabinet if certain "red lines" are crossed. He was also slapped down by fellow Lib Dem ministers for suggesting the coalition may not last until 2015 and risked a rift with the Treasury by criticising its Help to Buy housing scheme.

Despite Cable's digs at government policy, Lib Dem leader Nick Clegg has now won the backing of his party for four major policies being pursued by the coalition – austerity, the 45p tax rate, nuclear plants and tuition fees.

On Tuesday, party members gave him a further victory by voting to reduce, not scrap, Britain's Trident nuclear submarines. Senior Lib Dems had feared a revolt as rebel activists were calling for the party to "eliminate entirely the UK's nuclear deterrent as soon as practicable".

However, delegates appeared to be won round by Sir Nick Harvey, a former defence minister, who said the proposal for reducing Britain's submarines was the "boldest and most radical suggestion to come from any of the [major] nuclear powers".