Business secretary Vince Cable has said the Liberal Democrats will not support Iain Duncan Smith’s calls to cap child-related benefits to families with two children.

Mr Duncan Smith, the work and pensions secretary, said yesterday morning – ahead of a speech at the Cambridge Public Policy think tank – that families claiming child-related benefits may find the amount they are entitled to capped at two children.

He was being quizzed on measures contained in his speech that questioned whether families should expect never ending amounts of money for every child, when working households must make tough choices about what they can afford.

Mr Duncan Smith said: “My view is that if you did this you would start it for those who begin to have more than, say, two children. It’s about the amount of money you pay to support how many children. What is clear to the general public is they make decisions on what they can afford for the number of children they have – that’s the nature of what we all do. It’s about principle and fairness, not just about saving money.”

However, Lib Dem MP Vince Cable – who appeared on Question Time last night – said he didn’t support the proposal and that if it was Mr Duncan Smith’s intentions, it wouldn’t be fair and reasonable and isn’t government policy.

Mr Cable said: “We don’t agree with that. We made it very clear we will not go along with welfare cuts which are unfair."

He added: “We would not support it. Iain is a very decent, humane and good minister and the principle he’s trying to address and has done since he came in, is that it’s fundamentally unfair for people to be better off out of work than in work. That’s the fundamental unfairness he’s trying to deal with. But this particular proposal – I don’t know whether this is kite flying or a misunderstanding of what he said – wouldn’t be acceptable.”

The Lib Dems have also vowed to oppose David Cameron’s bid to scrap housing benefit for the under 25s.

Appearing on Question Time earlier this month, Simon Hughes, deputy leader of the Liberal Democrats, said he would not agree to the proposal and nor would party leader Nick Clegg.

He said: "…it’s not a done deal across the coalition and I, as proposed and as I’ve heard it, would not agree to it. I’m very clear about that."