Changes to mental capacity safeguards – intended to protect hundreds of thousands of vulnerable people – will hand care home managers and private hospitals far too much power, the government has been warned.

The Law Society, mental health charities and Labour have accused the Department of Health and Social Care (DoH) of rushing through legislation that would remove independent scrutiny of the monitoring process to ensure that residents were not subjected to excessive restrictions.

As many as 125,000 children and adults, mainly in care homes, are being unlawfully detained in England and Wales as a huge backlog of uncompleted applications for deprivation of liberty safeguards (DoLS) has built up.

The DoH has rejected the criticism, insisting that care home managers, anyone connected to them or those who run private hospitals would be prevented in future from completing its new “streamlined” assessments. It estimated that clearing the backlog under the current system would cost £2bn.

The mental capacity amendment bill, introduced in the House of Lords, was expected to bring in non-contentious changes to reduce the delays. Instead, the committee stage of the bill in the Commons this week turned into a party-political clash over alleged cost-cutting in the care sector.

The problem has become more acute as demand for care home places rises. In 2014, a supreme court judgment dramatically expanded the definition of those who should be subject to DoLS checks beyond hospitals to care homes and other types of accommodation.

A detailed Law Commission reform proposal in 2017 drew on widespread consultations to devise improvements, but critics have claimed the government bill has ignored its findings.

There are around 300,000 people over 65 in residential care in the UK; many suffer from dementia. Restrictions on liberty are also sometimes imposed on those with mental health conditions and those being cared for at home.

Sheree Green, a solicitor who specialises in mental health issues and chairs the Law Society’s mental health and disability committee, has been lobbying for changes to the bill and monitoring its progress.

She said: “The government’s bill is quite different to the one produced by the Law Commission.

“The [government] bill placed responsibility on the care home manager to do the DoLS or ‘liberty protection safeguard’ work, as it will in future be known.

“So the care home would be responsible for assessments and deciding whether it was necessary or proportionate option. You are making the person depriving the patient of liberty as essentially the gatekeeper.”

Some changes had been made by Matt Hancock’s department in response to criticism, Green said, but they were not sufficient enough to ensure that decisions were made independent of care homes.

Barbara Keeley MP, Labour’s spokesperson on mental health and social care, said: “It is reckless that this vital bill has been rushed through parliament without proper consultation by a government more interested in cost-cutting than safeguarding the human rights of vulnerable people with dementia, autism and learning disabilities.

“The government should pause this ill-thought out bill to give time for the proper consultation with interested groups, which this bill has so severely lacked.”

Sally Copley, a policy director at Alzheimer’s Society, said: “The 747,000 people currently living with dementia in England and Wales are in peril of having their rights infringed by reform of the Mental Capacity Act.

“More than half of the people cared for under DoLS are living with dementia. Though the current system is overly complex and bureaucratic, the proposed revision would see the same person who oversees the care home also decide what care a resident should have, with no independent safeguards – a troubling conflict of interest.

“We have made our objections to this clear to the government and are calling for them to take this new role for care home managers out of the bill so that the independence of the process can be guaranteed and the rights of people with dementia can be better protected.”

A DoH spokesperson said: “Our bill will reform a broken system and ensure vulnerable people have quicker access to legal protections by simplifying the process and minimising duplication, without compromising essential safeguards. Any money saved through streamlining this process will be reinvested in frontline care.

“Applications will be independently scrutinised by a responsible body, such as a local authority or clinical commissioning group, and care home managers are explicitly excluded from granting authorisations or completing assessments.

“Everyone will have the right to support and representation from independent advocates, friends or family members. All cases in private hospitals will be reviewed by an approved independent professional.”

The department said it had adopted the original model adopted by the Law Commission.