Two million people have been overpaid and subsequently faced recovery action from the government, policy officer Katie Lane said.

Unveiling its figures for 2005-06, HM Revenue and Customs (HMRC) this week claimed that “adjustments leading to an overpayment” fell by £100 million.

It also vowed to cut overpayments in “future years” by “around a third”.

But the system of recovery must be urgently reviewed to ensure that people are given a proper explanation and allowed time to mitigate the financial impact of the recovery, Ms Lane urged.

Some families are not given notice before recovery starts, giving them “no time to budget”, she said.

Vulnerable population sectors are often at most risk from poor tax credit administration, Child Poverty Action Group’s chief executive Kate Green warned.

“Uncertainty, underpayments and overpayment recoveries have left many families struggling with a reduced income,” she added.

But the 2005-06 figures just released do not factor in changes to the system for recovering overpayments introduced last year, Ms Green acknowledged.

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