The plans, which would see parents penalised if they fail to prepare for work when their child starts school, were revealed in last week's White Paper.
The Government aims to simplify the current benefit system by introducing a single credit that would replace Working Tax Credit, Child Tax Credit, Housing Benefit, Income Support, income-based Jobseeker's Allowance and income-related Employment and Support Allowance.
The Universal Credit would provide a basic amount plus additions for children, disabilities and housing needs. It is not clear whether the Universal Credit will include a childcare element.
Critics of the proposals said the Universal Credit, which will cost around £4bn to introduce, could leave families worse off because it cannot be adjusted to take into account local differences in childcare and transport costs.
The Institute for Public Policy Research said that the average annual cost of childcare in London is £11,050 for 25 hours a week compared with £4,368 in Scotland, and that once these costs had been factored in, work would still not be financially viable for parents in some parts of the country.
Nick Pearce, director of the IPPR, said, 'The principle of making work pay is the right one, but it will be critically undermined by the impact of previously announced cuts to tax credits and rising costs for childcare and transport.
'You can only guarantee that people will always be better off in work if their additional earnings are not wiped out by the costs of childcare and travel to work.'
The IPPR added that the amount of support families can claim for childcare costs through the tax credit system is being cut from 80 per cent to 70 per cent, making it harder for working families to afford childcare, and that those claiming the maximum support could lose £1,500 a year.
