The committee has branded the consultation process on the reforms as "flawed". It said the proposals, which will see a system of fixed fees replace hourly barristers' costs from next year, were "inflexible" and based on "weak evidence".
The report found that fixed fees would under-reward complex cases and over-reward simple cases. It said this would lead barristers to focus on lucrative simple cases to compensate for poorly paid complex cases, thus wasting resources.
The report cites an exodus of senior practitioners from publicly-funded family law.
The Legal Services Commission has also proposed that children's guardians and independent social workers should not be funded by legal aid.
Sir Alan Beith, committee chairman, said: "There is massive anxiety throughout the family justice system that these proposals are not based on a realistic understanding of how advocacy for children works and how important it is."
Nagalro, the organisation representing family court advisors and independent social workers, contributed to the report. Ann Haigh, Nagalro chair said: "The accelerating loss of experienced solicitors and children's guardians is a major tragedy for children. Practitioners are in despair at the ongoing destruction of the service that they value. We want to see the government, the Legal Services Committee and Cafcass working with legal and social work practitioners to ensure children and families receive the quality service they deserve."
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MPs slam family legal aid proposals
MPs have heavily criticised proposals made by the Legal Services Commission to reform family legal aid costs in a report by the Justice Committee.