Julian Brazier, chair of the all-party adoption and fostering group, said voluntary agencies had experienced a 33 per cent decline in the number of children placed in families they have recommended because of a perception among social workers that their fees are higher than state agencies.
He said that children are being kept on local authority waiting lists at the cost of thousands of pounds in foster care because social services departments are reluctant to pay the one-off fee for charitable agencies.
Brazier, who is MP for Canterbury, called on the Government to impress upon local authorities that cutting down on waiting lists should be the priority.
He said: "The use of voluntary authorities to cut waiting lists of unhappy children is vital and makes excellent economic sense, even though it means social services departments biting their lips and paying for out-of-house activity."
He added that charitable agencies often deal with hard-to-place children and are generally recognised as having higher standards than statutory agencies.
Jonathan Ewen, lead director for family placement at Barnardo's, confirmed the decline in placements but said the perception among social workers that charitable agencies were more expensive was not accurate.
"Local authorities don't tend to calculate their costs in the same way voluntary agencies have to," he said.
He warned that if the situation were to continue, many voluntary adoption agencies might have to close.
"Some adoption agencies have already shut in the past few years or ceased working in certain areas," he said.