Ministers have been accused of taking an “ideological” decision to make it harder for Universal Credit claimants to secure childcare.
Dalia Ben-Galim, Director of Policy at Gingerbread - a charity that helps single parents - said people receiving the new benefit struggled compared to those in full time work.
Speaking to the Commons Work and Pensions committee on Wednesday, she noted there were two systems of claiming back the costs of childcare - one of those on Universal Credit and one for people in full time work.
The tax-return scheme non-benefit claiming parents use only requires proof their child is registered with a care provider.
People on Universal Credit must provide a receipt as evidence for each payment made to a care provider - which often get rejected over small details.
Ben-Galim said: “I think that is ideological, that is an active decision that has been made about how people depending on where they are on the income scale are treated.
“I would argue it’s a real inequity and a real difference in how you prove what childcare you’re using”
Tory MP Heidi Allen, a member of the committee, said the situation was “terrible”.
Steven McIntosh, Director of UK Poverty Policy, Advocacy and Campaigns at Save The Children added: “Tax free welfare for families provides a gentler process for wealthier families and therefore supports them to not have cashflow problems and upfront costs.
“So the idea that Universal Credit is preparing families for budgeting they would need to do when then come off Universal Credit when the system that they would go onto is different and much for advantageous for those families doesn’t make sense.”
Universal Credit is currently being rolled out across the country, it combines all previous benefits into one and is meant to make the process of claiming them similar.
Currently only 14,000 parents are in receipt of Universal Credit out of 880,000 total claimants.
This number is expected to rise to half a million parents when Universal Credit is fully implemented.
Critics of the new system argue many people on lower incomes are pushed into hardship because they need to pay for childcare in advance and then wait four weeks for the government to reimburse them.
Frank Field, the chair of the committee, said: “This benefit would work really well if it was for the middle class.
“This is the middle class management of money. It doesn’t take into account if this is a daily wage or a weekly wage.”
Figures from the Department of Work and Pensions own figures say one in three childcare Universal Credit payments are late.
MPs on the committee also heard from individual Universal Credit claimants.
Hairdresser Gaynor Rowles said she never received her reimbursement on time and often had to wait for six weeks before it arrived in her account.
Administrator Vikki Waterman said she had to pay £1,300 upfront nursery costs before she’d had even gone back to work after maternity leave, she was repaid five weeks later.
Once her Universal Credit arrived two days later than she was told it would. This meant she was late on her next payment to the nursery, which triggered a fine of £50.
“We didn’t plan to be single parents, we should not be penalised for that. We want to work and earn a living, but there’s roadblocks everywhere we turn,” she said.
Thuto Mali, an ex-BBC journalist who is now a full-time mum for her two-year-old son, said she would only be left with £2 a day after childcare costs of £32,000 a year. She said: “Work didn’t pay for us.”