He said that news that 6200 families in Dundee were being asked to pay back tax credits was a “shocking indictment” of the administration of the scheme, and echoed concerns expressed last week by the Dundee Anti-Poverty Forum after the Government admitted almost £2 billion of tax credits had been overpaid last year.

Councillor Macpherson said, “It is totally unacceptable that in Dundee tax credits are still being overpaid in almost one-third of all cases. Families affected are being forced to pay back an average of £774 in overpayments.

“Last May, Paymaster General Dawn Primarolo claimed the system was working well for the vast majority of families. But these new figures show the minister is clearly in denial — in fact, nationwide 44%, over 2.8 million people, received incorrect tax credit payments.

“Too many hard-working families on low incomes are being plunged into debt and poverty by the very system the Government claimed was designed to help them. More families are being hit by the clawback of overpayments than ever before.

“The minister has known of the systemic failures in the tax credit system for years and these figures are yet more evidence that too little has been done to rectify them. Recent modifications to the system are too little too late. New ministerial leadership is now needed to introduce a radical overhaul of the way tax credits are administered.”

Across Dundee East & West constituencies combined, 20,300 tax credit awards were made in 2004/05, with 6200 (30.5%) of those overpaid — a total amounting to £4.8 million.

Nationally, nearly two million individuals had tax credits overpaid and 906,000 had tax credits underpaid.

Cllr Macpherson said, “There is a need to urgently reform tax credits. A system that is easier to administer and simpler to understand must be implemented.

“It is very clear from the first-hand testimony of constituents who have faced serious hardship because of the failures of the Government’s tax credit policy that there is a clear need for the Government to act now.”

During a visit to Dundee in April 2003, Chancellor Gordon Brown defended the administration of the scheme and said his department and the HMRC were making it “their priority” to resolve the problems.

The new tax credit system has triggered a wave of complaints from those it is designed to benefit since its inception in 2003.

The continuing crisis sparked a leading Dundee poverty worker to call on the government to wipe out nearly £2 billion of overpayments that could force families into financial hardship for a second year running.

Last week, Jim Milne, of the Dundee Anti-Poverty Forum, branded the government “incompetent”.