A Government agency has come under fire after it was revealed thousands of families have received the wrong tax credit payments because of administrative errors.

Figures published yesterday show 36,900 claims made by East Sussex and West Sussex families during the past year were overpaid by £29.8 million - an average of £808 each.

A total of 17,200 claimants were underpaid to the tune of £11.7 million.

It means that of the 48,300 tax credits awarded in East Sussex last year, a staggering 45.3 per cent were wrong.

Of the 72,400 awards in West Sussex, 43 per cent were wrong.

The Inland Revenue will now try to reclaim the vast majority of overpayments, threatening thousands of families with financial hardship. People who were not paid enough will be refunded.

MPs and support groups have blasted the system.

Eastbourne Conservative MP Nigel Waterson said: "I have been inundated by constituents who have allegedly been overpaid and are panic-stricken at the prospect of having to pay these monies back through no fault of their own.

"It seems that the incompetence of the Inland Revenue knows no bounds and I hope people do get what they are owed.

"It is incompetence of the highest order."

Of the 48,300 tax credit awards in East Sussex 14,700 overpayments were made totalling £12.4 million, with 7,200 underpayments worth £5.1 million.

In West Sussex there were 21,200 overpayments worth £17.4 million and 10,000 underpayments totalling £6.6 million.

Out of 22,200 credits awarded in Brighton and Hove last year, there were 6,800 overpayments totalling £5.8 million and 3,500 underpayments totalling £2.3 million.

Tim Loughton, Conservative MP for East Worthing and Shoreham, said the mispayment of child tax credits had created huge problems for his constituents.

Mr Loughton said: "What is particularly galling is that in many cases, my constituents have repeatedly questioned the Inland Revenue about whether they are entitled to payments and have been told they are, only to be told a few months later they are not.

"The system is very complicated, very bureaucratic and very difficult for ordinary claimants to work out what they are entitled to or not.

"A lot of my constituents have been left in the lurch through no fault of their own."

Michael Foster, Labour MP for Hastings, said: "I think we need a simpler system.

"Although the tax credits system has achieved enormous benefits to working families, the downside is that it is also very complex and that clearly needs to be addressed."

It is the second year families have had to deal with overpayments.

In 2003/4, the first year of the tax credit scheme, 41,500 Sussex families were ordered to make reimbursements totalling £41.4 million.

Families had their monthly payments either stopped or docked.

Nationally, more than 1.9 million claims were overpaid in 2004/5, up 120,000 from the system's first year.

It is feared overspending problems will also arise for 2005/06 as measures introduced to reduce the problem will not have taken effect.

The newly-published figures, compiled by Revenue and Customs analysts, also reveal another 20,700 claimants in Sussex were left £14 million out of pocket last year because they were underpaid.

Tax credits, which top up the income of low-income families, was designed to tackle poverty.

But campaigners have criticised the system, saying families have been forced into poverty as they struggle to return overpayments.

Child Poverty Action Group chief executive Kate Green said: "Tax credits have helped millions of low-income families, but they have not always worked as successfully as they should have done."

Concerned families can contact the tax credits helpline on 0845 300 3900.