Iain Duncan Smith's plans for welfare reform suffered a setback today when Rowan Williams, the archbishop of Canterbury, claimed that they could plunge the unemployed into "a downward spiral of uncertainty, even despair".

In a surprise intervention, the head of the Church of England also said the government's plans to force some people to work in return for unemployment benefits were unfair and could cause "a great problem".

Duncan Smith, the work and pensions secretary, will this week unveil plans for four-week programmes of compulsory community work doing jobs such as litter picking or gardening for jobless people deemed to have lost the work ethic.

His cabinet colleague, Danny Alexander, the treasury chief secretary, said today that the Work Activity placements would be used as a "sanction" against benefit claimants who fail to take up available support to find employment.

But the proposal came under fire from Labour and the unions, with the TUC warning it would harm jobless people's prospects of finding paid work and would undercut the employment of existing manual labourers.

Asked about the proposed scheme, the archbishop of Canterbury, Rowan Williams, told BBC WM Radio: "I've got a lot of worries about that. I don't immediately think it's fair. People who are struggling to find work and struggling to find a secure future are, I think, driven further into a sort of downward spiral of uncertainty, even despair, when the pressure is on in this way.

"It can make people who start feeling vulnerable feel more vulnerable. People are often in this starting place not because they are wicked or stupid or lazy but because circumstances have been against them. To drive that spiral deeper does seem a great problem."

Under Duncan Smith's plans, job advisers can direct jobseekers whom they believe would "benefit from experiencing the habits and routines of working life" to undertake a 30-hour-a-week work placement.

Postings are likely to be provided by charities or councils and would be designed to offer the jobseeker the opportunity to gain work discipline and skills while benefiting their local community. They will be required to continue seeking permanent work while on a placement.

Anyone refusing to take part or failing to turn up on time could have their £65-a-week jobseeker's allowance stopped for at least three months.

Details will be unveiled in the welfare reform white paper expected this week, which will set out Duncan Smith's plans for a universal credit to reduce welfare dependency and make work pay.

Alexander said: "One thing we can do is pull people in to do one or two weeks' manual work – turn up at 9am and leave at 5pm, to give people a sense of work, but also when we think they're doing other work.

"The message will go across; play ball or it's going to be difficult."

Alexander denied the government was seeking to treat the long-term unemployed like criminals doing community service. He told BBC1's The Politics Show: "There are sanctions in the system at the moment that say if people don't turn up for work-focused interviews and don't carry out job search responsibilities properly, they will lose their benefit for a period of time. We are seeking to extend these sanctions to other help we are offering and say to people: 'Take advantage of this help.'

"Long-term unemployment is a scourge in our society and people with the right support, I believe, can go out and find a job."

But the shadow work and pensions secretary, Douglas Alexander, accused the government of "focusing on the workshy but offering nothing to the workless".

There are five unemployed people chasing every job vacancy in the country, he said, adding: "The tragic flaw in the Tory approach is that, without work, it won't work. A longer dole queue will mean a bigger benefits bill."

In the BBC interview, Williams was asked how he felt about the £18bn programme of welfare cuts that form part of the coalition drive to restore Britain's finances.

"I feel very anxious about it to be honest because I do think that there are a lot of vulnerable people who are now worrying very deeply about what's ahead of them," he replied.

"There's no doubt at all we're in for a very, very difficult time and people will accept that I think if they feel that belt-tightening is going on across the board – it remains to be seen whether that will happen."

Asked whether he thought cuts were being pursued in a context of fairness where everyone was making a contribution, Williams replied: "I'm not completely convinced about that, I must say. Because with the stories that we have of continuing large bonuses of the very wealthy, it's not the sort of thing that convinces people that's something they can all sign up to. I'm anxious there."