The chancellor has defended Gordon Brown's tax credits system from charges that it is fundamentally flawed.

In his first Commons appearance in the post, Alistair Darling acknowledged that fraud and error in the working family support system has been too high.

But he argued that while this needs to be reduced, the formula designed by the now prime minister remains the best available.

Speaking at Treasury questions on Thursday, shadow chancellor George Osborne said Darling could not blame his predecessor for the "mess" he had inherited as he had been appointed by him.

"And there is no greater mess than the tax credits system and its administration," he argued.

He pointed out that the most recent Treasury figures for 2005/06 showed that £1.7bn had been overpaid and £549m underpaid.

The Conservative spokesman said the errors were bringing "hardship to many hundreds of thousands of families and of course cost the taxpayer dearly".

"Does he accept in his second week in the job that this is a totally unacceptable scandal?" he asked.

"And will he promise that the level of error and fraud will be reduced while he is chancellor?"

Darling replied that "of course it is unacceptable to have these high levels of error".

"I know as a constituency MP that where things have gone wrong, the sums have added up very quickly and that clearly causes distress."

However he added: "Especially with a system that allows for an annual assessment and especially when there are many families whose incomes and circumstances may change quite a lot during that period, I can well see how these errors arose."

While he agreed that "we need to everything we possibly can to reduce them", the chancellor appeared to rule out a major reform of the system.

"I still think that modelling this system on the tax system, when we try and do these things on an annual basis, rather than going to some far more complex system of assessment, is better," he said.

Osborne came back that Darling had not given a commitment to cut the rate of errors.

He pointed to the auditor general's recent report which says that "there is no evidence at the moment to demonstrate that there is going to be lower figures in the next published year".

It had also found that there is still £4bn of overpayments outstanding to the Revenue, with £1.6bn completely given up on.

"Does he believe that during his time as chancellor of the exchequer, he will be able to reduce the totally unacceptable levels of error and fraud that cause hardship to so many people that we represent in this House?" he asked again.

Darling insisted: "I have said that I think the level of error is too high, I want to see it reduced [but] it will take time to do that."

However he again argued that the government "also need to keep in the front of our mind the benefits that tax credits can bring".

The chancellor said the Tories had not come up with any alternatives and it was "not entirely clear what the Opposition's policy is".