Labor senators reject criminal welfare law

Labor has indicated it won't support federal government plans to cut welfare from people with serious criminal convictions in psychiatric facilities.

The party is calling for more consultation, saying submissions to a parliamentary inquiry highlighted the "completely inadequate" engagement with stakeholders over the changes.

In a Senate committee report recommending the bill be passed, Labor senators dissented, citing concerns it could have "serious negative impacts" on rehabilitation of criminals in psychiatric confinement.

Submitters raised concerns about unclear definitions of a serious offence, the financial impact and the impact on reintegration and clinical service delivery, the senators said.

The government says the measure, which will affect about 350 people, will save about $30 million.

It circumvents a recent court decision that found those in psychiatric confinement should get social security payments.

The government argues welfare is not necessary because adequate care is provided in facilities and those detained are the responsibilities of states and territories.