Iain Duncan Smith's Department for Work and Pensions is presiding over "a culture of fear" in which jobseekers are set unrealistic targets to find work – or risk their benefits being taken away, leading charities have told an official inquiry.

Hostel residents with limited IT facilities are being directed to apply for 50 jobs per week, while single parents are being told they must apply for full-time jobs to continue receiving jobseeker's allowance, the charities say in evidence to an official inquiry. On Wednesday, new figures are expected to show a record number of claimants have had cash withheld.

The weight of evidence also supports controversial claims by Vincent Nichols, the leader of the Catholic church in England and Wales, in the week he is due to be made a cardinal by the pope. "Something is going seriously wrong when, in a country as affluent as ours, people are left in that destitute situation and depend solely on the handouts of the charity of food banks," Nichols said on Tuesday.

The Department for Work and Pensions acknowledged mounting concerns about the increasing use of benefits removal – a process known as sanctioning – by appointing a former Treasury official, Matthew Oakley, to look at how the DWP is operating its tougher regime. His review, due to be published next month, has been criticised for its limited terms of reference, but nevertheless it has been swamped by criticism of how the unemployed and the disabled are being driven off benefits, often due to poor communication, bad administration or unexpected expectations being placed on the vulnerable.

In evidence to the Oakley inquiry, the charities Drugscope and Homeless Link warn that "the current sanctions regime creates a culture of fear of doing or saying the wrong thing. That may in fact lead to further benefit dependency and harming engagement with employment services, as vulnerable clients fear having benefits removed and never being reinstated."Crisis, the homeless charity asserts: "People who have been sanctioned are already on very limited incomes and face a significant further reduction, meaning they are left facing decisions between buying food, paying for heating and electricity and paying their rent. Debt is common and many face arrears, eviction and in the worst instances homelessness".

In its evidence, Gingerbread, which lobbies for the rights of single parents, also warns: "While sanctions may be necessary for a small minority of claimants who deliberately evade their jobseeking responsibilities, the current high levels of sanctions across all [jobseeker's allowance] claimants reveal a system in crisis and one that is systematically failing single parent jobseekers." It says single parents are being told they must work full-time.

The National Association of Welfare Rights Advisers says "claimants are being sent on schemes with no discussion about whether they are appropriate to their needs and no opportunity for them to make representations about it". Adequate notification is also not routinely being given". It says some claimants have been told: "You need to spend 35 hours per week doing job searches and show evidence of 50 to 100 job searches or job applications per week."

The evidence acts as a counterpoint to those who suggest welfare claimants are seeking a life on benefits. The government has been sufficiently embarrassed by the allegations that it has conceded it will look at a further inquiry into sanctions once the Oakley review has completed.

The number of sanctions in the year to 30 June 2013 was 860,000, the highest for any 12-month period since statistics began to be published in their present form. The figures due to be published on Wednesday cover the year to September 2013, and are likely to show a further increase in the number of claimants debarred from receiving benefits for as long as three years.

Disabled people are losing access to jobseeker's allowance at the rate of 14,000 a month, the charities say. In total, the number of them having their benefits sanctioned each month has doubled since the regime was toughened in October 2012.

A spokesman for the DWP said: "It is only right that people claiming benefits should do everything they can to find work if they are able to.

"Sanctions are used as a last resort and the rules are made very clear at the start of their claim.

"We will provide jobseekers with the help and support they need but it is only fair they live up to their part of the contract."

Since 2012, benefit payments can be suspended for a minimum of four weeks and for up to three years where a claimant fails to take sufficient steps to search for work, to prepare themselves for the labour market or where they turn down an offer of employment or leave a job voluntarily.

A survey by Manchester CAB found 40% said had not received a letter from the jobcentre informing them of the benefit sanction, and almost a quarter did not know why they had been sanctioned.