Sandwiched between a pharmacy and an estate agent on a busy road in Willesden Green, north London, Sarah Teather’s constituency office is nothing much to look at. It is small, cramped and crying out for a lick of paint. Inside there are framed newspaper articles telling the story of her sensational entry into parliament in 2003.

“Oh yes,” she laughs, though only momentarily, as she casts her mind back to that night. With Labour struggling in the aftermath of the Iraq invasion, Teather, then 29, became the youngest MP and a star in the making, overturning a 13,000 Labour majority to take Brent East for the rampant Lib Dems.

Nine years on, her modest base on 70 Walm Lane, opposite Willesden Green tube station, is doing far brisker business than those of most MPs. So much so that she and her staff offer advice sessions to constituents not once, as is normal, but five days a week. When Teather conducts her main surgeries on Wednesdays and Fridays, she has to decamp elsewhere. “We can’t do it here. The queues would be far too long. We have to go to a library or a mosque or use a local church.”

Brent Central – her old seat was lost under boundary changes – is one of the most ethnically diverse constituencies in the country. More than 200 languages are spoken in its schools. There are high levels of deprivation. Unemployment is high and the percentage of people on benefits and in rented accommodation is among the largest in the country. “It is a classic deprived, multicultural, inner city constituency,” she says.

As we sit down to talk, it is clear that something specific is on Teather’s mind. For someone used to being in the public eye, she is evidently on edge. It is only a few weeks since Teather lost her job as minister of state for children and families in David Cameron’s September reshuffle, but it is not the sacking itself that is causing her distress. It is the issue that disquieted her most during her time in government – the £500-a-week cap on welfare that ministers will place on families from April next year that is eating away at her.

When she was in government Teather kept fairly quiet about the issue – though she refused to vote for it in parliament. Now, free of collective responsibility, she feels it is her duty to speak out.

To begin, Teather frames her argument in terms of the battle ahead. She appeals to Lib Dems not to let the chancellor, George Osborne, deliver another huge blow to the welfare budget in his autumn statement next month.

“I think it is really important that the Liberal Democrats fight extremely hard in the negotiations in the lead-up to the autumn statement to safeguard as much as possible,” she says. “I am realistic and realise that the welfare budget is not going to escape completely unscathed but it simply cannot take another pounding as it has already.”

But she also makes no bones about the fact that, for her, the cuts and caps already agreed by the coalition are unacceptable and wrong. Brent, she points out, is an area with high rents where many people are already living in appallingly crowded conditions. She is in favour of that part of government policy which encourages people off benefits into work but not when it seeks to erode sympathy and support for the poor.

“Having an incentive in the benefits system to encourage people to work is a good thing,” she says. “It is a good thing because it encourages people to participate in society. But having a system which is so punitive in its regime that it effectively takes people entirely outside society, so they have no chance of participating, crosses a moral line for me.”

The local council estimates that more than 2,000 people in Brent will end up losing at least £50 a week when the cap comes in. At the top end, 84 families will lose about £1,000 a week. Many will be driven out of the area, including thousands of children.

She accuses parts of government and the press of a deliberate campaign to “demonise” those on benefits and of failing to understand that those in need of state help are just as human as they are. With vivid outrage she describes the language and caricatures that have been peddled.

“Whenever there is any hint of opposition they wheel out a caricature of a family, usually a very large family, probably black, most likely recent immigrants, without much English, lots of children, apparently chaotic, living in a desirable neighbourhood that middle-class people would like to occupy. That is the caricature and of course it is a partial spinning of the truth and it allows the demonisation to take place.

“I would really urge particularly Conservative colleagues but people in all parties to be careful. I don’t think we can afford to preside over a society where there is a gradual eroding of sympathy for people at the bottom end of the income spectrum and a rapid erosion of sympathy for people on benefits.”

She returns to the theme of morality and politics, saying: “I think deliberately to stoke up envy and division between people in order to gain popularity at the expense of children’s lives is immoral. It has no good intent.

“There are all sorts of things you have to do when times are tight that have negative consequences but you do them for good purposes. To do something for negative purposes that also has negative consequences – that is immoral.”

Teather is convinced that the benefits cap was never intended to save money. When in government she says that she saw work showing that the policy would not save any money because emergency accommodation would have to be found for people who would inevitably be thrown out of current homes. As a former minister for children and families, Teather believes elements of the government are in effect playing politics with children’s futures.

“The policy was essentially conceived as a political device. It is simply not in the same league as other policies that are challenging in their consequences but done for a good purpose. I don’t think it was even remotely conceived as a financial cost-cutting device. I think it was conceived as a political device to demonstrate whose side you are on.”

The core of Teather’s argument is that the entire policy will not only be cruel and socially disruptive but also self-defeating because families and – most tragically – many thousands of children will be driven out of their homes and schools and forced to live in areas where rents are lower but where there will be less chance of adults finding jobs. She talks of a “reverse Jarrow March” occurring in April next year when the cap comes in, as “many thousands of people leave London” adding: “My fear is that a lot of people will effectively just disappear from the area in which they were living. I think some very horrible things are going to happen.”

Teather is aware that she will be attacked for her intervention both by the rightwing press and some colleagues at Westminster, where even Labour is wary of being seen to criticise welfare cuts. She is careful to praise Nick Clegg for having fought valiantly to limit the effect of reductions.

But her most acute concern is for the many thousands of young people involved. She says: “Obviously not all of those children will be made homeless and it is difficult to tell how many will be, but a substantial number will be required to move and that will have a destructive effect on their education. It will remove them from their friends. It will have a destructive impact on the support networks that their families have.”

Many of those who come into her surgery have little idea that the benefit cap will hit them so soon. She says: “I see people who come to see me about something else and I realise that they have three children, that they are not working and I think ‘there is no way you are not going to be affected by this cap’.”

Middle-class people would only notice the effect when their children lose their friends. She says: “When the child in the nice middle-class family comes home and says ‘my friend has just disappeared’, I think then it might hit home and they might realise a set of children have disappeared from the class – kids who last week came to Johnny’s birthday party. Then it will start to be real. We are in a vacuum phase where I am frankly terrified about what is going to happen.”

At times Teather is close to tears as she unburdens herself. She says the day she deliberately failed to vote for the government was “extremely difficult”. But then as now – with her decision to speak out – it was a moral judgment she felt she had to make. She says: “Driving a sledgehammer through a fault line that already exists between the working poor and the non-working poor – setting up that hostility – is the thing that I find most difficult morally.”