MPs say the UK Border Agency's attempts to clear a massive backlog of cases could become an amnesty for immigrants with no right to be in the UK.
Home Affairs Committee chair Keith Vaz said the backlog was almost the same as Iceland's population (320,000) and spiralling out of control.
Immigration Minister Mark Harper said the UKBA was taking "robust action".
The MPs also criticised the way the agency had dealt with mentally ill immigrants facing removal.
In its latest regular report on the workings of the agency, the committee said the total of all the separate backlogs of cases across the immigration system stood at more than 302,000 at the end of June. That was up 25,000 over three months.
Some 174,000 of the cases were in what is known as the "migration refusal pool". These are people who are recorded as having no permission to be in the UK, but officials do not know if they have left or have stayed without authorisation - or have perhaps been accepted lawfully after a separate application.
UKBA case backlog
- Current asylum cases 25,500
- Asylum "controlled archive" 74,000
- Current immigration cases: 3,500
- Immigration "controlled archive": 21,000
- Migration Refusal Pool 174,057
- Former foreign prisoners: 3,954
- Untraced former foreign prisoners: 53
- Total: 302,064
The pool, set up in 2008, came to light only earlier this year when it was discovered by the chief inspector of immigration, John Vine.
As of August, a further 95,000 cases were in what the agency calls "controlled archives" - piles of unresolved applications made by individuals with whom officials are no longer in touch.
The UKBA has pledged to close the controlled archives by the end of 2012 - but MPs said they were not convinced final checks on each case could be done to an acceptable standard, given that only 149 staff were dealing with them.
"We are concerned that the closure of the controlled archives may result in a significant number of people being granted effective amnesty in the United Kingdom, irrespective of the merits of their case," said the MPs.
"Preparations should be made for the event that a number of people whose applications are closed may subsequently be discovered to be in the country. We expect to hear from the agency what the consequence of this would be both for the individual concerned and for the taxpayer. We are particularly interested to find out whether any such individuals would be offered an amnesty."
'Robust approach'
Keith Vaz said: "Entering the world of the UKBA is like falling through the looking glass. The closer we look, the more backlogs we find, their existence obscured by opaque names such as the 'migration refusal pool' and the 'controlled archive'.
"Start Quote
End Quote Mark Harper Immigration MinisterEvery day it gets harder to live illegally in the UK - we are tracking people down and taking action against them"
"UKBA must adopt a transparent and robust approach to tackling this problem instead of creating new ways of camouflaging backlogs."
But Immigration Minister Mark Harper said: "This report raises some legitimate concerns but we are taking robust action and it is working.
"Every day it gets harder to live illegally in the UK - we are tracking people down and taking action against them. We are restricting access to benefits, free healthcare and financial products, and businesses can be fined up to £10,000 for every illegal worker they employ.
"We are winning more deportation cases in the courts, exceeding visa processing targets and have introduced interviews to test whether foreign students are genuine - all of which are praised in this report."
The MPs also said they were concerned that since 2011 the UK Border Agency had lost four court cases in which judges said immigration detainees with mental health problems had been falsely imprisoned and subject to inhuman or degrading treatment.
"We are concerned that the cases... may not be isolated incidents but may reflect more systemic failures in relation to the treatment of mentally ill immigration detainees," said the MPs.
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