The rising cost of sickness and disability benefits is “devastating” for the public finances, Prime Minister Sir Keir Starmer said, after his government announced a major overhaul of the welfare system.

Sweeping changes were unveiled on Tuesday, which ministers say are aimed at saving £5bn a year and encouraging people to work, while protecting those who cannot.

The government’s reforms have faced criticism from Labour backbenchers, unions and charities, who fear the changes could push more disabled people into poverty.

But the bill for health and disability benefits is still set to rise, and Conservatives argue ministers have not gone far enough to cut spending.

When asked if the government would need to make further cuts to welfare in the future, Work and Pensions minister Sir Stephen Timms said the reforms outlined on Tuesday would amount to a “substantial saving”.

“We do think we’ve now made the system sustainable and we’re committed to maintaining it,” Sir Stephen said.

But shadow chancellor Mel Stride said Labour’s welfare changes were a “rushed” attempt to find savings and shore up the government’s finances ahead of the Spring Statement next week.

Stride said it was possible “to make serious savings in welfare” and insisted his party’s plan to cut spending on health-related benefits by £12bn was achievable.

Hundreds of thousands of people are likely to be affected by the benefit changes, which will make it harder for people with less severe conditions to claim disability payments.

Central to the government’s reforms is a tightening of eligibility criteria for the personal independence payment (Pip) – a benefit aimed at helping those with increased living costs due to disability or long-term illness.

More than one million people could lose out on this payment under the changes, the Resolution Foundation think tank has estimated.

Its chief executive, Ruth Curtice, told the BBC the government had “made quite a detailed change to the system”, meaning “we can’t tell exactly who will be affected”.

Writing in the Times newspaper, Sir Keir said the current system had “wreaked a terrible human cost”, with people who wanted to return to work unable to access the support they needed.

Sir Keir said the current system was “actively incentivising” people away from work and represented an “affront to the values of our country”.

“This is not just unfair to taxpayers,” he said. “It is also a bad long-term outcome for many of those people.”

He pointed to the 2.8 million working age people out of work because of long-term sickness, saying this was a “damning indictment of the Conservative record” on welfare.

With much of the focus of the reforms on getting people into the workforce, the Confederation of British Industry (CBI) warned the government not to ask business to “shoulder any more of a burden”.

Chief Executive Rain Newton-Smith said: “If we want to see growth in our economy, if we want to help those two million young people back into work, we need to not make it more costly or risky to hire people.”

Under the changes, reassessments to determine whether someone is still eligible for financial support will increase, but those with the most severe health conditions will never be reassessed.

The government will also introduce a “right to try” guarantee, which will allow people to try out working without losing their entitlement to benefits if it goes wrong.

Spending on health and disability-related benefits has ballooned since the Covid pandemic, and has been forecast to increase from £65bn a year currently to £100bn by 2029.

There will be a string of votes in the Commons where uneasy Labour MPs will have to vote either way on whether they support the government’s reforms.

Work and Pensions Secretary Liz Kendall confirmed that the changes to the eligibility for PIP will require primary legislation, while some of the most thorny measures will not be open to public consultation.

Government sources said that this was part of the effort to persuade the independent Office for Budget Responsibility (OBR) to “score” these savings – that is, to agree with the government that they will save £5bn.

This is crucial because the principal reason these reforms are being announced now in the run-up to the Spring Statement is to help restore the “headroom” that the government has lost.

Some MPs, charities and unions have spoken out against the government’s proposals amid fears of the potential impact on vulnerable people.

The Disability Benefits Consortium, which represents more than 100 charities and organisations, said: “These immoral and devastating benefits cuts will push more disabled people into poverty, and worsen people’s health.”

The SNP said the measures would “harm the most vulnerable” and “mark the start of a new era of austerity cuts”.

Work and pensions select committee chair Debbie Abrahams, a Labour MP, said there were “more compassionate” ways to balance the books “rather than on the back of sick and disabled people”.

Many Labour MPs have accepted the government’s argument that there is a moral case for what Kendall has called a more “pro-work system”.

Meg Hillier, the chair of the Treasury select committee, said she had looked into work programmes in the past and warned that “good intentions can be hard to deliver”.

The Labour MP said not all employers are prepared to accept disabled people into work, and suggested there was a big challenge, adding that it was more than putting numbers into a “sausage machine” as ministers were dealing with people with complex needs.

Several benefits claimants spoke to the BBC after the announcement. Some welcomed aspects of the reforms, while others expressed concern.

“If I don’t have Pip I’ll be a burden to my family,” said Daisy, 22, from west London.