Bridget Blow, chief executive of the embattled outsourcing firm, said, "ITNet has not provided the service to which Islington residents are entitled. We are very sorry for all the real distress that this has caused."
Islington Council now plans to revise its outsourcing contract with ITNet for housing benefit and council tax benefit systems, which have come under fire from residents.
According to local MP Chris Smith, the system has caused lost applications, delays and needless eviction notices.
Smith recently urged Islington to follow the example set by the London Borough of Hackney and end its contract with ITNet.
Islington Council admitted that its housing benefit service has "not been up to scratch" but insisted that the revised contract will be results-driven. It added that outstanding benefits cases have been cut from 8,593 in December 2000 to 3,714 in April this year.
Council leader Steve Hitchins said, "There has been considerable pressure to terminate the contract with ITNet, but grabbing easy headlines is not the answer to the problems our claimants face."
According to a committee paper sent out by the council last week, improved service will form the basis of a tougher contract between Islington and ITNet. The proposal was due to come before the council's policy committee earlier this week but the council refused to reveal any details about the proposed new contract.
However, Smith is keeping up the pressure. "Out on the estates and streets of Islington there are still thousands of people who are suffering at the hands of a totally inadequate service from ITNet," he said.