Families in need of emergency welfare payments are subject to a “postcode lottery” after councils were put in charge of handing out the cash, MPs have said.
Previously, central government distributed emergency grants for food, heating and other essentials, but since 2013 local councils have taken over the responsibility.
A report from the Commons Work and Pensions Committee said that although the system worked well in some places, its success was not uniform across the country, and urged better coordination between local and central government.
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"As the old saying goes, a stitch in time saves nine: emergencies that are not dealt with early will escalate," said committee chair Frank Field.
"Some councils are doing great work and realising the potential of localised emergency welfare—tackling the underlying causes of their residents’ needs, where possible promoting self-sufficiency and ultimately saving public money.
"But localisation of welfare is the most radical departure in welfare since the Attlee government laid down a minimum income throughout the entire country for what would otherwise be the destitute poor. Inevitably some local authorities are not yet achieving a national minimum.
"Local and central government must take joint responsibly for closing the gaps in the safety net and minimising both the human and financial costs."
The committee called on central government to put the guidance given to councils on when to make discretionary payments made to disabled people in hardship on a statutory footing.
And it warned of a "lack of any cross-departmental evaluation" on the effectiveness of the welfare system as a whole in "preventing severe hardship and destitution".
The report said: "Localisation risks blurring the lines of national and local responsibility, leading to confusion among vulnerable people about where to turn in a financial crisis.
"Closer joint-working and sharing of national and local data must be prioritised."
The committee's report came as a separate study by the National Audit Office spending watchdog said the future of local welfare provision "appears uncertain", with councils acting cautiously in designing schemes amid concern about demand and funding
"With reducing resources and competing pressures, many councils say they cannot afford to continue offering this support without specific government funding," the NAO said.
The watchdog found that some councils had already stopped or cut the welfare provision they introduced following the transfer of responsibilities in April 2013.
Councillor Claire Kober, from the Local Government Association, said a lack of funding was the main problem for councils as they seek to provide emergency help.
"Without additional funding, there is a real risk that many will be unable to afford to continue to run their local welfare schemes or will have to scale them back significantly," she said.
A DWP spokesman said the new system was aimed at delivering “fairness” and stressed the department's close working with local authorities and charities.
"It is right that we have given local councils more control because they understand best their local area's needs," the spokesman added.