Changes to the way government money is allocated to police forces in England and Wales will be delayed, Police Minister Mike Penning has said.
He apologised to the Commons for a “statistical error” in a new formula which assesses population size and other data to calculate funding.
The issue has caused “a great deal of concern to police forces”, he admitted.
The proposed changes for 2016/17 will now be delayed, Mr Penning said. The Home Office did not say for how long.
Mr Penning said the government “regrets” the mistake and apologised to MPs and to all 43 police forces in England and Wales.
Answering an urgent question in the Commons, he said: “We recognise this has caused a great deal of concern to police forces around the country.
“I and the government regret this mistake and I apologise to the House.”
The amount of money police forces receive from the government is based on a funding formula, which assesses population size, social and economic factors, crime rates and other data.
The government had launched a consultation on plans to change the formula, prompting six police and crime commissioners (PCCs) to threaten the Home Office with legal action.
They argued the proposals were “unjustified and deeply flawed”.
Last week the Home Office revealed the new formula was based on flawed calculations.
Speaking in the Commons, Mr Penning said the government would now seek the views of PCCs and the National Police Chiefs Council before proceeding with the changes.
The current formula would be used to establish police force funding for the 2016/17 financial year, he added.
Shadow policing minister Jack Dromey condemned the error as an “omnishambles process”, saying Mr Penning must “get a grip and get it right”.
Labour MP Keith Vaz, who is also home affairs select committee chairman, said 31 out of 43 police forces would have lost money as a result of the error.
“What started off with good intentions is rapidly descending into farce. To call it a shambles would be charitable,” he added.
Joanne McCartney, Labour's London Assembly policing and crime spokesman, added: “With the Metropolitan Police facing severe cuts to their budget, this is more than just an embarrassing error from the Home Office, it's a monumental mess of their own making.”