More than three million people will lose around £1,700 each as a result of the government’s cuts to benefits, it has been revealed.

Analysis by the Department for Work and Pensions shows the impact of the welfare reforms will be far more severe than originally thoughts.

Rachel Reeves wants to reduce the welfare bill by £5 billion, mainly by making it harder for people to claim Personal Independence Payments.

The chancellor unveiled a further £500 million of cuts in her Spring Statement after the Office for Budget Responsibility said the government’s initial plans would not raise enough money.

According to the DWP’s own impact assessment of the cuts, 3.2 million families – including current and future benefit claimants – will lose an average of £1,720 a year.

However, a further 3.8 million families will gain an average of £420 a year, they said.

Campaigners protested outside Downing Street as the chancellor made her way to parliament to deliver her economic update to MPs.

James Taylor, director of strategy at the charity Scope, said: “Today the chancellor confirmed a plan to massively cut disability benefits and as a result lower the living standards of disabled people, pushing more into poverty.

“It is obvious these cuts are simply about saving money and not by the ‘moral’ desire to get more people into work. 

“The government needs to listen to disabled people and understand the catastrophic impact these decision will have on their lives.”

James Watson-O’Neill, chief executive of the national disability charity Sense, said: “It’s difficult to see the proposed welfare reforms as anything other than a cost-cutting measure, and we are deeply concerned that the government is attempting to balance the books at the expense of disabled people.

“The independent impact assessment on welfare reform paints a stark picture, surpassing even our worst fears – with millions of disabled people at risk of losing vital financial support, and those already most vulnerable set to be hit the hardest.

“Sense is particularly concerned that three million people who have been assessed as unable to work could face a loss of nearly £2,000 a year in benefits.

“Many of these individuals already struggle to afford essential equipment and support, with half of those affected by these changes going without necessary items due to financial constraints. For these people, further cuts would be catastrophic.”