Government wants to increase penalties for sick and disabled claimants who fail to adhere to back-to-work agreements

The government has drawn up plans to withdraw £71 a week from sick and disabled benefit claimants if they fail to take steps to get back into the workplace.

A leaked draft of a Department for Work and Pensions (DWP) template letter warns sick and disabled claimants they will lose 70% of their weekly employment support allowance (ESA) if they refuse to take part in work-related activities, more than doubling the current fine.

The DWP has also told the Guardian that it is finalising plans on whether to make unpaid and unlimited work experience placements part of work-related activity.

At present, those claiming ESA who have also been deemed fit to eventually return to work after controversial health assessments run by the private firm and Paralympic sponsor Atos can only be docked a maximum of £28.15 a week if they break their agreement with their job advisers without "good cause".

But the draft letter, expected to be sent to all those in the ESA work-related activity group (Wrag), says that from 3 December the penalty will jump to £71 a week out of a maximum allowance award of £99.15.

Claimants can be placed into two groups: the support group, who are deemed to be much further away from the workplace and have few conditions placed on their benefit claim; and the Wrag group, who are assessed to be capable of taking steps towards moving into work immediately and must undertake a range of activities to help get them back to work.

Last week, Atos's London headquarters was targeted by hundreds of protesters complaining about the company's sponsorship of the Paralympic Games and what they said was the inadequacy of their sickness tests at filtering out those who are more seriously incapacitated.

Those in the work-related activity group have recently included people diagnosed with terminal cancer with more than six months to live, victims of strokes, those with mental health issues and people paralysed from the chest down.

Latest figures show that there are just over 340,000 people in this group and that between 1 June 2011 and 31 May this year, 11,130 of them have been sanctioned for an average duration of seven weeks.

A spokesman from the DWP said: "Ministers have spoken about toughening the benefits regime. We are not asking people in the ESA Wrag to do anything different but we have proposed changes to the regulations as we move towards universal credit. The regulations are still to be discussed in the House [of Commons]."

As the measure would go through parliament as a statutory instrument, it would normally be expected to be approved without a vote.

Charities have warned that stripping Wrag claimants of 70% of their allowance risked "devastating" consequences for people's health, especially since a good number of those currently being sanctioned have little understanding of why they are being punished.

The draft letter warns: "From 3 December 2012, the law is changing and you could lose more money, for a longer period of time, if you do not:

• Attend and take part in work-focused interviews, without a good reason.

• Carry out work-related activities that your adviser asks you to do, without a good reason."

Under a heading titled: What is the change?, the two-page letter goes on to explain that there will be increased penalties and punishments for those "who do not take the actions requested by the adviser".

The letter says: "Employment and Support Allowance payments could be reduced by £71 a week until you take the required actions. After that your payments will also be reduced for an additional one, two or four weeks. The number of weeks will depend on whether you have had your benefit reduced in the previous 52 weeks."

The plan to increase the penalty for the sick and disabled follows earlier revelations that the government wants to bring in unpaid and unlimited work experience placements for those in ESA Wrag group.

A DWP PowerPoint presentation to charities late last year explained that unpaid work experience without any statutory time limit would be a "supportive measure" where suitable to "personal circumstances".

Following that meeting, the government passed clause 55 of the Welfare Reform Act 2012 to legally permit officials to make the sick and disabled in the Wrag group do work experience as a condition of their benefit claim.

The DWP has now told the Guardian the department has yet to finalise plans on unpaid work experience for the sick and disabled but did not rule out their introduction by 3 December.

Paul Farmer, chief executive of the mental health charity Mind, warned that the increased sanctions could devastate people's mental health.

"It is important to remember that people in the work-related activity group have been assessed as unfit for work – they are not at full health and are still very vulnerable," he said. "They face significant barriers to return to employment and need support rather than the threat of sanction.

"Whatever an individual's health problems, slashing their benefit is only going to exacerbate the strain they are already under. The additional stress and anxiety incurred by the sanction – worries about paying for bills, rent and even food – risks devastating their mental health."

He added that advisers did not have "enough mental health expertise" to understand the complexities of mental health issues and that if introduced, unpaid work experience backed up with the threat of sanctions would also "risk damaging people's mental health" and push them even further away from the workplace.

Gillian Guy, the Citizens Advice chief executive, said lots of cases had already cropped up where benefit sanctions were applied "inappropriately, often causing great hardship".

"People have their benefits cut with little or no warning or explanation or understanding of what they failed to do.

"If people who are judged to be too ill or disabled to work are to face having all their benefit stopped for failing to stick to their agreement, it's essential that it's absolutely clear what has been agreed, and that this is reasonable given their health condition or disability," she said.

"With much harsher sanctions being brought in it's urgent that the government starts monitoring how sanctions are used and the impact on claimants and their families," she added.