Liz Kendall, the work and pensions secretary, laid out plans for £5bn savings but faces rebellion from some Labour MPs

Up to 1.2 million people with disabilities will lose thousands of pounds under the government’s welfare overhaul, experts have said, as campaigners warn the plan will exacerbate the country’s mental health crisis and push more children into poverty.

Liz Kendall, the work and pensions secretary, laid out her long-awaited changes to the benefits system on Tuesday, announcing a set of measures aimed at getting more people into work and saving £5bn by reducing disability payments.

But with experts warning the plans will reduce the incomes of more than 1 million people, ministers are braced for the biggest rebellion yet of the Labour government, with as many as 30 MPs expected to vote against the plans within weeks.

In a sign of the growing pushback which ministers now face, Debbie Abrahams, the Labour chair of the Commons work and pensions committee, warned against “balancing the books on the backs of sick and disabled people”.

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But the most financially significant decision is Kendall’s plan to introduce drastically tighter limits for who can claim personal independence payments (Pips), which are intended to help people with their quality of life and are not connected to employment. The Pip savings will help the chancellor, Rachel Reeves, stick to her fiscal rules when she announces her spring statement next week.

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Ministers will not lay out where exactly the £5bn savings are coming from until next week, though officials indicated most would come from reduced Pip spending. The Resolution Foundation thinktank said the plan would see between 800,000 and 1.2 million people losing support of between £4,200 and £6,300 a year by 2029-30.

Louise Murphy, a senior economist at the Resolution Foundation, said: “Around 1 million people are potentially at risk of losing support from tighter restrictions on Pip, while young people and those who fall ill in the future will lose support from a huge scaling back of incapacity benefits.

“While it includes some sensible reforms, too many of the proposals have been driven by the need for short-term savings to meet fiscal rules, rather than long-term reform. The result risks being a major income shock for millions of low-income households.”