A government plan to tighten the rules on welfare payments to cancer patients will be challenged by peers from across the House of Lords on Wednesday.

Lord Patel, the crossbencher and former president of the Royal College of Obstetricians, has won the support of the Labour party for his amendment to the bill aimed at watering down the government's proposal to change welfare payments.

The vote is likely to attract the widest support on Wednesday when peers consider a series of amendments to the welfare reform bill on the third day of its report stage in the Lords, where it is being piloted by the welfare reform minister, Lord Freud.

The bill's centrepiece is the universal credit that will wrap most tax credits and benefits into a single payment. Lord McKenzie of Luton, the former work and pensions minister who is Labour's welfare spokesman in the Lords, confirmed that the party is cautiously supportive of the universal credit.

But he also cited the words of the Labour peer and anti-poverty campaigner, Lady Lister of Burtersett, that the bill is contaminated by disagreeable ideas.

Labour teamed up with 13 Liberal Democrat rebels before Christmas to reject a plan to dock housing benefit from families with spare bedrooms in their home.

The government signalled last week that it was prepared to give ground on a plan to impose a cap of £26,000 on benefits paid to out-of-work families.

Amid wide Lib Dem unease over the cap, based on the average income for all families, ministers are examining whether instead to calculate the cap on the income of families in work.

Labour will join forces over the next two weeks with crossbenchers in the Lords to challenge some of the elements identified by Lister.

On benefits to cancer patients, Labour will support Patel's amendment to ensure they continue to receive full payments under the Employment Support Allowance (ESA).

The Macmillan cancer charity has estimated that as many as 7,000 patients could lose £94 a week in sickness benefit. The plan is to limit to 12 months the time anyone can received contributory ESA without being means-tested when they have been out of work due to illness or disability.

"There should be no restriction of contributory ESA for them," McKenzie said.

Labour is supporting Patel's amendment to a clause in the bill that will increase the eligibility period for contributory ESA to two years.

McKenzie said: "The government has a fairly minor amendment which does fulfil one of its pledges about making sure that people who end up in the support group, the most severely disabled and incapacitated, are able to continue to get contributory ESA. But the big battle is on the restriction to one year."

Labour will support an amendment by crossbench peer Lord Listowel to ensure those who are disabled at a young age and have not built up national insurance contributions will still be able to claim ESA.

"This is for the obvious reason that young people who are severely disabled have not had the chance to get into the labour market," McKenzie said.

Government sources stressed that the support for cancer patients has been improved and no final decision has been made.

A source in the Department for Work and Pensions said: "Everyone who has cancer will get the support they need. If they are in the support group, they will receive unconditional support, with no time limit. Our proposals would allow everyone with cancer to make their own choice about the kind of support they need: unconditional financial support, or support with getting back into work. It is important our policy reflects that employment can be beneficial to someone's recovery and getting their life back together."

Downing Street strongly defended the bill. The prime minister's spokesman said: "The government had to tackle a record deficit and has set out plans to do that over the course of the parliament. One of the things we have had to look very hard at is the welfare system.

"The welfare bill had ballooned over the previous decade and it was important to bring that bill down, make sure that the people who received benefits were the people who really needed benefits and make sure that people had the right incentives to get off benefits and get back into work. That is what we are doing."

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