The Passport Office has insisted there is "no backlog" in applications, despite claims that as many as 500,000 people are now waiting for their documents to be sent out.
Some three million passports have already been issued this year, with officials processing an average of 18,000 applications a day over the last two months.
One MP said thousands of families face having their summer holiday plans ruined because documents were not being prepared in "anything like" the normal time.
Paul Pugh, chief executive of the Passport Office, said more than 97% of straightforward applications were being processed within the target turnaround time of three weeks, with 99% processed within a month.
"We've been experiencing exceptional early summer demand for passports, in part due to the improving economy and a rise in holiday bookings," he said.
Immigration Minister James Brokenshire said the number of people applying for passports between January and now was at a 12-year high.
He said extra staff had been moved from other duties, such as anti-fraud work, to help deal with the problem but insisted that the increase had been identified early enough to tackle the problem.
But Labour's Geoffrey Robinson, the MP for Coventry North West, claimed the Government had "left it so late" to react to what he called a "burgeoning problem" that there was not enough time to deal with it before the start of the summer getaway.
"The nub of the problem lies in the cuts the Government has made," he said.
Photographs taken by a disillusioned worker at Liverpool passport office show files containing tens of thousands of applications yet to be dealt with.
Union bosses say the problem has been caused by job cuts and claimed the Home Office had a "track record" of denying delays.
Families are now being told their applications can be fast-tracked if they pay an extra £55, on top of the £72.50 standard fee - a total of £137.50.
Mark Lazarowicz, the Labour MP for Edinburgh North and Leith, added: "I've had more problems with the Passport Office in the last three weeks than I've had in my previous 13 years as an MP.
"This mess should have been sorted out months ago."
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