George Osborne is facing a fresh backlash over welfare after his official car was apparently photographed parked in a disabled space.
The Daily Mirror published an image apparently showing the Land Rover in a restricted bay at an M4 service station.
A senior Tory source said the vehicle had been reversed into the berth while Mr Osborne was inside buying a meal at McDonald's. "George does not condone this in any way," the source said.
The latest twist emerged as the welfare war between Labour and the Tories escalated further.
Shadow chancellor Ed Balls accused Mr Osborne of "nasty and divisive" tactics for linking the case of child killer Mick Philpott to the coalition's benefits shake-up. Philpott, who was jailed for life for killing six of his children in a fire, lived in a council house in Derby, claimed thousands of pounds in benefits and refused to get a job. He was handed a 15-year minimum term after being convicted of manslaughter along with his wife Mairead and friend Paul Mosley.
The photograph was taken on Wednesday at Magor services, near Newport, as the Chancellor returned from a speaking engagement at a nursery in Cardiff.
The incident could prove damaging for Mr Osborne amid claims that welfare reforms - including housing benefit cuts for people with spare rooms - will hit the disabled. Richard Hawkes, chief executive of disability charity Scope, told the Mirror it showed "how wildly out of touch the Chancellor is with disabled people in the UK". He said: "They will see this as rubbing salt in their wounds. Many are already struggling to make ends meet, yet the Chancellor's response has been to cut vital financial support and squeeze local care budgets."
The Chancellor - who was last year embroiled in a row over whether he had tried to travel first class using a standard ticket - has led the Government's defence of the benefits changes and earlier this week accused opponents of talking "ill-informed rubbish". In the face of growing pressure from churches, charities and opposition parties, Mr Osborne said suggestions the changes marked the end of the welfare state were "shrill, headline-seeking nonsense".
On a visit to Derby, Mr Osborne was asked if the Philpotts were a product of Britain's benefit system. "Philpott is responsible for these absolutely horrendous crimes, these are crimes that have shocked the nation. The courts are responsible for sentencing," he replied. "But I think there is a question for government and for society about the welfare state, and the taxpayers who pay for the welfare state, subsidising lifestyles like that. And I think that debate needs to be had."
On his blog, Mr Balls said: "A Chancellor has to think very carefully before they comment on the issues of the day. How they do so says a lot about the character of their Chancellorship. That is why I believe George Osborne's calculated decision to use the shocking and vile crimes of Mick Philpott to advance a political argument is the cynical act of a desperate Chancellor. We should have a proper debate about welfare reform. And we should discuss what action needs to be taken to tackle the scourge of long-term unemployment including the need for a compulsory jobs guarantee so that people cannot languish on the dole for years and years on end. But for the Chancellor to link this wider debate to this shocking crime is nasty and divisive and demeans his office. George Osborne now needs to explain why he has chosen to comment on this case, and why he has sought to make a link between a terrible crime and the welfare system, when he has said nothing about the financial circumstances of those who commit other terrible crimes."