Thousands more unemployed people will be forced to work for free or lose their benefits under controversial plans to be announced by the work and pensions secretary, Iain Duncan Smith, as the government is warned its drive to get people back into work appears to be floundering.

The scheme, under which the jobless are obliged to accept an unpaid work placement for a month to keep their benefits, will be "significantly extended" within the next two weeks, according to Whitehall sources.

The government believes forcing people to work or lose their benefits is inculcating a work habit in the 10,000 people currently on the programme and will be effective for others.

Ministers are also looking at rolling out a national trial under which the unemployed must work for up to six months for free to avoid their benefits being docked.

However, The Observer has learned that a release of statistics on the outcomes of the mandatory work programme had been due this week but is to be delayed, raising concerns about its efficacy in helping the country's 887,000 long-term unemployed – defined as being jobless for over a year.

Critics also claim the move is an indication of the panic within government over the failure of ministers' various schemes to tackle long-term unemployment, which is at its highest level in 16 years.

Last week, the Employment Related Services Association, the trade body for welfare-to-work providers, warned for the first time that its members may not meet the government's "minimum" targets in getting people back into work. It revealed that fewer than one in four of the people who had been on the work programme for six months had found a job.

Labour claims a House of Commons Library analysis shows that initial government estimates of Department for Work and Pensions spending on jobseeker's allowance and housing benefit have been revised upwards by £9bn, as the number of people coming off benefits has halved in the last year.

The number of people claiming housing benefit has also shot past the five million mark for the first time, with more than 90% of new claimants since the 2010 general election being those in low-paid, part-time work.