Gillian Guy, chief executive of Citizens Advice, told the newspaper: “When the safety net fails, people are left with no way of putting food on the table, paying the rent or keeping the lights on.”
She said people are confused about what funding is available, and find themselves forced to turn to food banks or loan sharks for help.
Under the local welfare assistance scheme around one in four applications are rejected compared to two in ten under the previous social fund.
A lot of the schemes do not offer cash or loans but use the funding to provide food parcels and vouchers.
Simon Danczuk, the Labour MP for Rochdale, accused the government of pushing the needy into the “hands of payday loan companies and food banks.”
He added: “They have in effect privatised the lender of last resort.”
A spokesman for the Department for Work and Pensions said: "In contrast to a centralised grant system that was poorly targeted, councils can now choose how best to support those most in need. It is for local councils to decide how they spend their budgets."
Councils said they had refused emergency help in some cases because benefit claimants had incorrectly been referred to local authority welfare schemes by jobcentres.
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