New Conservative peer Howard Flight has provoked outrage after suggesting welfare cuts will cause unwanted "breeding" among benefit claimants.
No 10 has moved quickly to distance itself from the comments, but senior left-wing figures have jumped to criticise the prime minister's judgement in ennobling the former Tory MP.
Mr Flight issued an "unreserved apology" and withdrew the remarks, after David Cameron called for him to do so.
Speaking about cuts in child benefit, Mr Flight was quoted by the Evening Standard newspaper as saying: "We're going to have a system where the middle classes are discouraged from breeding because it's jolly expensive.
"But for those on benefits, there is every incentive. Well, that's not very sensible."
Child benefit will be withdrawn from people earning more than £43,000. A row over the issue dominated the Conservative conference last month.
Mr Flight's comments will reopen a debate David Cameron had sought to emphatically close - and have the potential to cause the government considerable embarrassment.
TUC general secretary Brendan Barber called Mr Flight "an insensitive throwback to the worst of 1980s politics within days of being made a peer by the prime minister".
The news comes just one week after Lord Young resigned from his post as an adviser to Mr Cameron over comments quoted by the Telegraph claiming the British people had "never had it so good", in spite of the "so-called recession".
Mr Flight was deselected by Michael Howard as a candidate in the 2005 general election for implying the Conservatives had secret planned spending cuts being "sieved" for what was publicly acceptable. He has not yet taken his seat in the House of Lords.
It is not the only time he has made controversial comments. Writing on the ConservativeHome blog last year about the expenses scandal, he commented: "For the last decade everything to do with the public sector has too often been seen as a sacred cow, beyond criticism or reform.
"But the tide of public opinion is now sufficiently aroused by the perceived hypocrisy of the parliamentary nomenclature to generate a tidal wave of support for the next government to take the necessary axe to the public sector waste machine, which is dragging down our economic prosperity."
In the same interview, he implied the Lib Dem presence in government was to blame for policies such as the child benefit cut.
The prime minister has worked hard since becoming Conservative leader in 2005 to counter popular negative perceptions of the party, but today faced a barrage of criticism from opposition parties.
For Labour, shadow work and pensions secretary Douglas Alexander said the "shameful but revealing comments" called Mr Cameron's judgement into question.
"Last week one of the prime minister's senior advisers told us we'd never had it so good and now his latest hand picked peer comes out with these comments," he said.
"Instead of dithering for hours as he did with Lord Young, David Cameron should take swift action and make Howard Flight apologise."
From the SNP, Dr Eilidh Whiteford commented: "Howard Flight is no stranger to controversy so perhaps it says more about David Cameron's judgement that he has nominated him for elevation to the House of Lords.
"Frankly, the prime minister should now reconsider his nomination. The Tories are still totally out of touch which is why the people of Scotland continually reject them at the polls."
Plaid Cymru welfare and pensions spokesperson Hywel Williams added: "Quite frankly I am horrified at this blatant display of contempt by high-profile Tories for those with less money than themselves.
"Of course the current welfare system needs to be reformed and simplified - but to make such contemptuous remarks really shows the Tories' true colours.
"The Conservatives clearly have no understanding of the lives of ordinary people."