The government has admitted that 800,000 more households stand to lose out under its flagship welfare scheme than previously thought.

In a revised impact assessment of its universal credit scheme, which will replace six of the seven main means-tested benefits and tax credits for those of working age, the Department of Work and Pensions (DWP) says that 2.8 million households will get a lower entitlement to benefits. That compares with a figure of 2 million announced in October 2011 after officials first considered how the changes would affect claimants.

The sums are large. About 800,000 households will see an average loss of £137 a month, while the 300,000 hardest hit families will lose as much as £300 a month. About 200,000 lone parents will also receive lower awards under the new scheme than the current system.

The much greater impact is due to a combination of factors – the deteriorating economic environment appears to have added £700m to the costs of the policy according to the Office for Budget Responsibility, while officials also concede that universal credit is less generous than first envisaged. The chancellor's decision last week to raise benefits at a rate lower than the consumer price index will also have affected the scheme.

The revised impact assessment was released late on Tuesday. Ellen Broome, policy director at the Children's Society, said: "We have some serious concerns about how it will affect some of the most disadvantaged children and families. Some of our poorest working families will struggle to afford vital childcare. Our evidence also reveals that many disabled children and disabled lone parents will be significantly worse off."

Labour also questioned whether there were not dwindling savings from the scheme, pointing out that the 2011 impact assessment claimed that universal credit would reduce administrative costs by £500m due to its "reduced complexity". This, says the opposition, has been revised downwards to £200m.

Liam Byrne, the shadow work and pensions secretary, said: "Universal credit is now set to be a car crash for 2.8 million families who will be worse off than under the current system. That's nearly 50% more than when plans were first published."

"The very people this government has let down are being asked to pick up the tab for ministers' failure. 300,000 families on middle and modest incomes will lose £3,600 a year – that's £300 a month. We were promised a welfare revolution but universal credit is descending into universal chaos. Instead of fixing welfare reform, this government is now just flogging working families."

The government, however, pointed out that it would be providing funds to ensure that any claimant that does lose out from universal credit would be compensated unless their circumstances changed. ADWP spokesman pointed out that more people would gain than lose, with 3 million families "better off under the new system by £168 a month".

He added: "We are targeting support to the poorest claimants. People will have their level of benefit protected when they move onto universal credit so no one loses out. Lone parents in particular will benefit from the better work incentives of universal credit and for the first time they will be able to access childcare support when they are working for even a few hours."