Public trust in the Inland Revenue has been "severely dented" by problems with the new tax credits system, its chief has told MPs.
Claimants have experienced delays
Campaigners say thousands of low income families have suffered since the scheme's introduction in April.
Inland Revenue chairman Sir Nicholas Montagu blamed most of the difficulties on a new computer system.
It would never get rid of errors completely, he said, but he would be disappointed if they were not halved.
Sir Nicholas was giving evidence to the Commons public accounts committee, which has already criticised the credits failings.
The National Audit Office has warned the tax credits system may not be back on track until 2005.
Former Social Security Minister Frank Field said the "disgraceful" service had made people sick with worry.
Sir Nicholas told the public accounts committee: "I accept public confidence has been severely
dented. I very much regret the fact a lot of people who should have been paid on
time were not."
He blamed EDS, the computer firm involved in the project, for the problems.
"I expected EDS to provide a system that was stable and fit for purpose. I expected them to alert me if at any stage there was any reason to suppose the system would be anything other than fit and stable for purpose," he said.
The MPs heard that the time set aside for testing the new system had been cut from 12 weeks to four weeks.
Senior EDS executive, Bill Thomas, told the MPs the work was expected to bring the company revenue of £168m over four years, with a profit margin of about 7%.
He defended the company, saying the Inland Revenue had to share responsibility for the problems.
"I am not ashamed of what my 900 colleagues did on the system," said Mr Thomas. "But I very much regret the problems."
Edward Leigh, the chairman of the public accounts committee, accused EDS of "unleashing" the system of some of society's most vulnerable people without first doing its homework.
Despite the system not working, the company had still made a "fat profit" on the scheme, he complained.