Rachel Reeves is coming under intense pressure to use the budget to abandon a £1.3bn cut to benefits for people with disabilities, first announced by the Tory government, amid warnings it will lead to hundreds of thousands of the most vulnerable people losing almost £5,000 a year.

The leading independent thinktank, the Resolution Foundation, has called on the chancellor to drop or delay changes to the work capability assessment (WCA), arguing that key aspects of the policy have not been thought through, and that around 420,000 people who are unable to work through disability or ill-health could lose up to £4,900 a year.

The controversy is another headache for the government, particularly as the savings from the Tory-conceived plan are already baked into the Office for Budget Responsibility’s forecasts for the public finances that will underpin the budget on 30 October.

This latest dispute over benefits cuts follows outcries over the government’s plan to limit winter fuel payments to only the poorest pensioners, and its refusal to end the two-child benefit cap that is being blamed for tipping many thousands more children into poverty every month.

Mike Brewer, interim chief executive of the Resolution Foundation, said the plan should be scrapped or at least rethought: “These changes disproportionately affect lower-income households, and could lead to individuals missing out on support, in spite of being at substantial risk of harm, opening up the government to legal challenges.

“Ministers are right to scrutinise fast-rising disability benefit spending. But these changes have not been thought through properly. They should be delayed – if not cancelled – until they are.”

The changes to the WCA were first announced by former Tory chancellor Jeremy Hunt last September. They are due to take effect from April 2025, with a final judgment on whether to proceed expected to be announced in Reeves’s budget.

Over the next six years, expenditure on both working-age incapacity and disability benefits is projected to increase rapidly from £43bn in 2022-23 to £63bn in 2028-29, a real-terms increase of £21bn (or 48%).

As a result, Hunt announced changes to the current system with a new regime that was sold to the public as help for getting people into work, but which disabilities groups now say will simply make it harder for those most in need of state help to access the benefits they need.

In particular, the Resolution Foundation is critical of plans to remove the “substantial risk” descriptor (which enables people to receive benefits on the grounds of ill-health if not doing so is judged to pose a substantial risk to their physical and mental health), saying this has not been fully thought through.

It says: “This change risks making the process too stringent, and risks either not saving the government money or putting vulnerable people at risk.”

The Resolution Foundation says 47% of families who receive these incapacity benefits come from the bottom 30% of the income distribution.

Mikey Erhardt, campaigner at Disability Rights UK, which works to improve the rights of disabled people, said: “It is farcical for the Labour government to be resurrecting Conservative legislation that would subject hundreds of thousands of us to reassessments and conditionalityinstead of the support we need.

“Carrying on the last government’s proposed changes to the work capability assessment process would prove that we are living under a government pursuing ever more surveillance of our lives – another government happy to gamble disabled lives by subjecting us to increased benefit sanctions and eroding rights.”

He added: “Changes to the ‘substantial risk’ rule are reckless and dangerous. It is already a state failure that this is often the only route people who experience mental ill-health and distress can access the support we need. With over 600 benefits-related deaths in the last three years, many of which were suicides as a result of benefit sanctions, pushing disabled people who experience mental distress into work should be the furthest from this government’s priorities.”

A DWP spokesperson said: “Spiralling inactivity and millions of people denied the right support is holding the country back and stifling the economy.

“We believe the work capability assessment is not working and needs to be reformed or replaced, alongside a proper plan to support disabled people.

“We will deliver the change the country needs; supporting those who can work, into work, and delivering growth in every part of the country.”