Three million people have experienced driving licence delays since April 2020 - costing some their jobs, income and independence, a report by MPs has found.
The Driver and Vehicle Licensing Agency's (DVLA) system to process applications is "slow, inefficient and in need of major improvement", the cross-party Public Accounts Committee (PAC) said.
People described losing their jobs or income and being unable to start or return to work because of the delays, those who gave evidence to the committee said.
Drivers with medical conditions were affected the most, they said.
The committee said the pandemic "inevitably" had an impact, with three million suffering delays since the month after COVID first hit.
About 60 million phone calls went unanswered over two years, it added.
The Department for Transport (DfT) was accused of taking a "hands-off approach" by failing to ensure the DVLA is using modern working practices and up-to-date technology.
Labour MP Dame Meg Hillier, chair of the committee, said: "The pandemic inevitably made operations more difficult, but the DVLA and DfT were not prepared for the challenge of keeping essential driving licence services running - and especially not for those who needed it most.
"Some of the DVLA's operations are antiquated, it lacks a comprehensive strategy for modernisation and on PAC we're unconvinced they're more ready for the next crisis.
"When that does arise, it will again be the most vulnerable customers - people for whom driving is a lifeline - who are worst hit. That's just not acceptable. The DVLA has to get its act together."
The committee said some DVLA customers experienced isolation and worsening mental health as they were unable to go about their daily lives without a valid driving licence.
Between April 2020 and March 2022, about 60 million calls to the DVLA about driving licences went unanswered - 94% of the total it received.
Complaints about the DVLA received through MPs "increased tenfold" between 2019-20 and 2021-22, the report said.
The PAC recommended the DVLA set up better systems for delays, improve its customer communication and implement a contingency plan to be shared with the committee.
Liberal Democrat transport spokeswoman Wera Hobhouse said the "shocking delays" show customers "are being let down on an industrial scale".
She called on the government and the DVLA to "get a grip" as delays can "lead to people losing their jobs or worsening mental health".
A DVLA spokesman said: "We are back to normal processing times across our services. All standard paper applications were back to normal turnaround times by May 2022.
"Our online services worked well throughout the pandemic and for the vast majority of our customers, their dealings with DVLA would have been trouble free. 98% of people who applied online received their driving licence within just a few days.
"During the pandemic, we issued more than 24 million driving licences, the vast majority of which were issued within three working days."