The Department for Work and Pensions should be stripped of its responsibility for providing social security benefits and job support to ill and disabled people, a thinktank has urged.

A scathing report by Demos says public trust in the DWP has been shattered by a series of botched reforms to disability benefits, and the imposition of a brutal sanctions regime that has left many vulnerable claimants stressed and in poverty.

The department is risk averse, defensive and seen as hostile to claimants, it says. “With its current configuration, culture and reputation, it is impossible for the DWP to engage meaningfully with ill and disabled people,” it concludes.

Benefits such as the employment and support allowance (ESA) and personal independence payment (Pip) should be instead handled by devolved governments, while job support could be run by councils, the NHS and charities, it says.

“After years of failings, ill and disabled people have lost all faith in the DWP. This demands a radical rethink of the department’s responsibilities,” said the report’s author, the Demos researcher Ben Glover.

The call comes amid concern over what critics say is the DWP’s punitive and insensitive benefits policy and contemptuous treatment of some claimants. Last year the chair of the charity Scope, the former top civil servant Andrew McDonald, who receives Pip because he has Parkinson’s and terminal cancer, called the disability benefits system a “hostile environment”.

The DWP’s reputation has been battered in recent years over its handling of disability benefits, including its widely distrusted fit for work tests, its Pip assessments, and its plans to migrate of hundreds of thousands of existing ESA claimants on to the much-derided universal credit benefit over the next three years.

The Demos report includes a poll of 2,000 people that found just 13% of the public believed the DWP was doing a good job in helping sick and disabled people find work, falling to 10% among disabled people and among those who have experienced a mental illness.

Almost two-thirds of disabled people and 63% of those who have experienced mental illness indicated they believed the DWP did not understand the concerns of ill and disabled people.

There was strong poll support for the view that the DWP should prioritise the health and wellbeing of ill and disabled claimants, and providing them with employment skills rather than focusing on getting them into work.

The report welcomed the apparent willingness of the work and pensions secretary, Amber Rudd, to involve claimants in reforming the system. “However, we believe we need reforms at both a greater pace and greater significance … [and] we do not have faith in the department to deliver these.”

The DWP rejected the report, saying it had increased the numbers of disabled people in employment in recent years, and its own claimants survey indicated that the majority of its frontline staff were considered knowledgeable, helpful, polite and understanding.

A DWP spokesperson said: “This survey of random members of the public, many of whom may never have claimed benefits or interacted with DWP, compares poorly with our most recent survey of actual claimants, which found that 80% of disabled people were satisfied with DWP’s services.”

A short paper by Tom Pollard, a former policy officer at the charity Mind, describing his frustrating experiences during an 18-month secondment at the DWP was published by Demos in January. It criticised the department’s obstructiveness to new ideas, and “narrow and fixed ideas of how things should be done”.