A seriously disabled British soldier injured in Iraq is taking the Department for Work and Pensions to a tribunal next week after they cut his carer's allowance.

Adam Douglas, 45, a former lance corporal with the East and West Riding Regiment (now the Yorkshire Regiment), was wounded in a grenade attack in 2003 and then hurt in an accident in Basra in 2006. He has had more than 20 operations on his spleen and spine but doctors say there is no more they can do. Though he regained some independence after being fitted with a device to help him better control his bowel and bladder functions, he says he still needs help washing and going to the toilet, and regularly uses a wheelchair.

He says that six successive doctors, including three appointed by the DWP, have agreed his injuries are serious.

But assessors from the department have stopped a £70 monthly allowance to Douglas's wife, Maria, for help with his "bathing and toileting difficulties" after in effect accusing him, he says, of "faking" his injuries. The DWP said he had failed to inform them of a "change in circumstances", essentially that his health had improved.

It's a decision described by Douglas's former platoon sergeant, Andrew "Jock" Henderson, as "an absolute disgrace". He said: "British soldiers are thrown on the slagheap when they return from combat – we give this country freedom and look how the government treats us."

Henderson wrote to the tribunal: "Corporal Douglas was considered for a serious commendation for gallantry. His actions were directly responsible for the saving of large loss of life or injuries to others by preventing the tanks and infantry to cross undetected into friendly forces' rear areas."

On Monday, Douglas will attempt to overturn the decision at a tribunal in Leeds. He believes he is being punished for getting his life on track: he founded the Forgotten Heroes, a charity for the carers of wounded service personnel, and got a job. "What's the point of having these medicals done if a decision-maker can simply overrule them?" he said.

"They couldn't have picked on a more honest man: I work full-time, I am the chairman of the only forces charity that is dedicated to solely the carers, I am a school governor for children with special needs and I am a prospective candidate in mainstream politics and I stand as a candidate as a prospective Leeds city councillor."

He added: "Just because I have these injuries, why can't I maintain what I do? Why do I have to be labelled with 'I must have to stay at home and do nothing'? Why can't I still be productive and contribute? I don't want to stay at home and cry into my spilt milk, it won't get me anywhere. Finally I have a mortgage to pay and even with Maria working full-time and me claiming everything that I could possibly claim, we would still be left with no cash to spare each month or possibly not enough income to pay for a mortgage and daily living."

Alan Taylor, a vicar and Liberal Democrat councillor in Leeds who was until recently the city's lord mayor, said in a letter to the tribunal: "I have known Adam for the past four years as a political colleague and during that time I have had no reason to doubt his integrity or honesty."

Douglas says five tribunals found in his favour when he challenged DWP decisions involving other benefits. However, the DWP cut the care allowance and demanded repayment of £351. His life insurance provider Scottish Widows had carried out a covert investigation into him after he tried to cash in a policy that would mean his £28,500 mortgage was paid off if he could prove he was either dead or critically injured.

Scottish Widows said his injuries did not meet its criteria for "total permanent disability". He appealed to the Financial Ombudsman Service (FOS), arguing that the occupational therapist commissioned by the insurers was unqualified to assess many of his disabilities, particularly those associated with his toileting problems.

The Guardian has seen the occupational therapist's report, which assessed him on five criteria: washing and bathing, dressing and undressing, eating, toileting and moving from bed to chair or wheelchair. She says she would expect Douglas to be able to do many tasks but reported no evidence of seeing him do them – for example, being able to getout of the bath unaided.

The FOS dismissed Douglas's complaint, he said, on the basis that the financial procedures followed by Scottish Widows were correct. The FOS cannot rule on medical matters.

Despite his failed appeal, Douglas continued to pursue his case with Scottish Widows. It then put him under surveillance, apparently suspicious after learning he had set up the charity and was working as an administrator at a local primary care trust.

He says he was recorded apparently offering help to removal men when he was moving to a more disabled-friendly home but Douglas insists he did not and could not have carried anything heavy into the house and that the video merely showed him directing friends who were helping him move.

A joint police and DWP fraud investigation was opened. But last March the Ministry of Defence police told Douglas the case had been discontinued.

He used the Freedom of Information Act to get copies of the three medical reports carried out during the DWP investigation. The DWP uses a scoring range from one to three, three being the greatest level of impediment. Douglas says he scored three on all the back, leg and spinal examinations.

Helen Barson, who has worked with Douglas for three years at NHS Leeds, has submitted a statement to the tribunal which reads: "I can honestly say Adam manages his disabilities with incredible discretion but there have been occasions when his catheterisation equipment has let him down and I have had to give him help so that he can get to the toilet to sort himself out."

A spokesman for Scottish Widows said: "We have reviewed this case in detail and the situation remains that Mr Douglas's disability does not meet our total permanent disability claim criteria. Mr Douglas took his case to the Financial Ombudsman Service in 2009 who advised that his complaint would not be upheld."

The DWP said: "We owe the men and women who have served their country a huge debt of gratitude and will do everything we can to help them to find work and make sure they get all the benefits they are entitled to if they are injured.

"We agree that the current DLA [disability living allowance] system is confusing and can result in inconsistent awards. That is exactly why we're reforming the benefit, so that seriously injured members of the armed forces will automatically get the support they need to help them with the additional costs associated with their injuries and won't have to do a separate assessment."