George Osborne has rebuffed critics of cuts to tax credits, insisting it was failure to control public spending that would be "economic cruelty" for working families.

He hit back after David Davis joined senior backbench demands for a rethink, warning that the squeeze could prove as damaging to the party as the Poll Tax was under Margaret Thatcher.

The independent Institute for Fiscal Studies has warned that 13 million families will lose an average of £240 a year when the cuts come into effect in April, while three million will lose £1,000 or more.

Shadow chancellor John McDonnell said Mr Osborne had "nothing to say" to "struggling" families and was prioritising the interests of bankers and millionaires.

But the Chancellor said it was Labour's economic policy that posed the biggest risk to workers' quality of life.

In a conference speech pitched at winning over disaffected centre-left voters from the Opposition, he said: "Failing to run a sound economic policy is the most unkind, uncaring thing a government can do.

"It's always the poorest who suffer when the economy fails. It's always working families who lose their jobs.

"That's not a kinder, caring Britain," he added - in a reference to Labour leader Jeremy Corbyn's pitch to voters.

"I'll tell you what that is: it's economic cruelty dressed up as socialist compassion.

"And we're not going to let them wreck the lives of working people again.

"You don't show your compassion by the size of the benefit cheque you dole out, rather you get people back to work.

"Every argument we won, we have shifted the terms of the debate in our country and created a new centre ground, around fiscal responsibility and lower welfare, reformed public services and support for business too."

Prime Minister David Cameron on Sunday resisted pressure from figures such as former Tory minister David Willetts to review the Chancellor's plans and "ease" the cuts in next month's Autumn Statement.

A halt to the reductions was one of the central demands of a march by tens of thousands of opponents of the Government's policies through Manchester yesterday.

And Mr Osborne was struck another blow when The Sun newspaper - which backed the Conservatives at the general election - declared in an editorial that slashing benefits relied upon by working people "cannot be justified".

"The Tories can't claim to be the workers' party while kicking away the ladder from those with a foot on the first rung," said the Sun editorial.

"We are all for working tax credits being scrapped once pay has risen sufficiently. We are nowhere near that."

Mr Davis told the newspaper: "The Government needs to look at this again. For three million families losing £1,000 doesn't mean cancelling your holiday, it means an empty pantry.

"I hope this doesn't turn out to be our Poll Tax."

Mr Osborne said a "typical" family with one person working full-time on the national minimum wage will be better off overall, when all of the Government's changes to benefits, income tax allowances and the establishment of a new "national living wage" are taken into account.

And he told ITV's Good Morning Britain that maintaining tax credits at their current level would force the Government to divert money away from priorities like health and education.

Mr McDonnell said: "It was very disappointing that the Chancellor also had nothing to say to those people living in the real world who are seeing their tax credits cut by £1,300 a year, and who are struggling to pay sky-high rents or are struggling to find enough work to get to the end of each month.

"Instead, he spoke to the few, those millionaires sitting in the hall who will benefit from an inheritance tax cut he is giving them, and to those bankers who were also sat alongside them in the hall who'll benefit from income and corporation tax cuts.

"Angela Eagle and I are in Redcar today meeting people who will be looking at that speech and won't be fooled by Osborne's smoke and mirrors. They want substantive answers in the here and now, and sadly George Osborne failed to offer them any today."

TUC general secretary Frances O'Grady said: "The Government's cuts to tax credits are an astonishing attack on working people. They are so severe that, even with a higher minimum wage and higher tax threshold, most low-paid families will be much worse off.

"But despite people from his own party urging the Chancellor to think again, he has refused to listen."