The Department for Work and Pensions has a “fortress mentality” that prevents it from tackling the “unacceptable hardship” created by the switch to universal credit, a report from a committee of MPs has found.

With the chancellor under intense pressure to act in his budget next Monday to cushion the impact of the new system, the public accounts committee warns the government has ignored the concerns of those at the sharp end.

Universal credit is the most radical change to Britain’s welfare system in decades, rolling six benefits into one, which is paid in arrears, to mimic a monthly wage packet.

Deep cuts announced by George Osborne in 2015 mean that, for many people, it will be significantly less generous than the benefits it replaces.

The committee took evidence from charities and local authorities, which told MPs they had seen sharp increases in rent arrears and food bank usage among new recipients of universal credit, not least because of the five-week wait for the first payment.

The DWP’s own survey found that 40% of people were experiencing financial difficulties eight or nine months into their claim, and work and pensions secretary Esther McVey recently admitted the rollout would leave “some people worse off”.

But the committee said McVey’s department has repeatedly been unresponsive to on-the-ground evidence about the practical problems with universal credit, and what it called the “unacceptable hardship” faced by many.

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“The department’s systemic culture of denial and defensiveness in the face of any adverse evidence presented by others is a significant risk to the programme,” the MPs said, citing the DWP’s response to an earlier critical report by the National Audit Office (NAO).

McVey was forced to apologise to parliament earlier this year, when the NAO’s head, Sir Amyas Morse, complained that she had misrepresented the report as positive, when it had called for a “pause” in the rollout of universal credit.

Several of the organisations that gave evidence told the committee they had a positive relationship with local jobcentres, but found it impossible to influence the DWP nationally.

Meg Hillier, the public accounts committee’s chair, said: “This report provides further damning evidence of a culture of indifference at DWP – a department disturbingly adrift from the real-world problems of the people it is there to support.

Philip Hammond has been urged to put money back into the system in next week’s budget – by reversing cuts to work allowances that determine how much claimants can earn before their benefits are clawed back, for example.

The committee said the help available to people moving over to universal credit, known as “universal support”, which is funded by the DWP but commissioned by councils, is patchy, and “not fit for purpose” – because it does not include debt advice, for example.

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By June this year, 980,000 people were in receipt of universal credit, with another 7.5 million due to move over to the new system. So far, only new claimants, or those whose circumstances have changed, have been moved on to universal credit.

The government recently delayed so-called “managed migration”, which will allow existing claimants to be moved across, from January 2019 to later in the year, apparently because it feared being defeated by backbench rebels in parliament if it tabled the necessary regulations.

The committee criticised the DWP’s claim that switching to universal credit will save taxpayers up to £8bn, by coaxing more people back into the workforce.

The original rationale for the system, when it was devised under McVey’s predecessor Iain Duncan Smith, was to sharpen work incentives, and make it easier to move seamlessly into a job without switching from one system of support to another.

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But Duncan Smith now argues cuts have blunted those incentives. The DWP now claims 200,000 additional people will be in work as a result of the new system – down from the 300,000 it was aiming for in 2011.

But the committee says that number is “purely hypothetical”, because the department cannot say how it will measure whether the target has been hit – or how many of those moving into work would have done so under the old system anyway.

Former Tory prime minister Sir John Major recently warned that the losses faced by families under the new system “would not be something that the majority of the British population would think of as fair,” and drew an analogy with the furore created by the poll tax.

A DWP spokesperson said: “We will carefully consider the findings in the report – a number of which we are already working on. For example, we have recently begun a new partnership with Citizens Advice to deliver better support to the most vulnerable, and are working with stakeholders to ensure the Managed Migration process for people moving onto Universal Credit works smoothly.

“So far this year we have already announced several improvements to Universal Credit, such as plans to reinstate housing benefit for vulnerable 18-21 year olds, making direct payments to landlords, offering 100% advances and providing an additional 2 weeks of housing benefit for claimants.”