Far too many vulnerable families are receiving an overpayment of tax credits, meaning they have to repay £770 to the government on average.
A committee of MPs has expressed "dismay" at the level of overpayment of tax credits.
The report by the public accounts committee claimed that these extra payments are averaging at £1 billion a year. More than £7 billion was overpaid between 2003 and 2007, with almost £3 billion unlikely to be recovered from this total.
As many families that receive the credits are "highly vulnerable and struggling in the economic downturn", according to committee chairman Edward Leigh, the average repayment of £770 per year is "distressing" for them.
"The tax credit scheme was designed in such a way that there was always going to be a degree of overpayment," Mr Leigh explained. "It is the scale of that overpayment that has continually caused dismay."
Despite the problem having improved since a set of new measures were brought in a few years ago - annual overpayments used to stand at £1.9 billion - more than 1.3 million families were required to send back overpayments over the 2006/07 financial year.
Tax credits were introduced by the then chancellor Gordon Brown in 2003, but were dogged by problems following their inception, with underpayments and frauds also contributing to the difficulties.
