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The discs contained child benefit receipts, which include details such as names, addresses, date of birth and, in many cases, bank account details.

The CDs were sent from Customs to the National Audit Office, but lost in transit. Amazingly, the department then sent a second set of CDs, although this time by recorded delivery.

Customs says it doesn't believe the discs have fallen into criminal hands, but the Metropolitan Police is making inquiries into their disappearance.

The chairman, Paul Gray, resigned because the transportation of

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the data on the discs has breached data protection rules. In a letter to Customs staff, Gray says he is "standing down as HMRC chairman as a result of a substantial operational failure in the department."

The BBC claims government ministers have known about the data loss for as long as 10 days, raising the question why affected parties haven't been alerted to the potential theft of their personal details sooner?

Nigel Evans, the head of the Parliamentary All Party Group on Identity Fraud, says the public had a right to know as soon as the government did. "He [the Chancellor] should have told the public straight away in order that they could have taken precautions against anyone's information being used by ID fraudsters," he tells the BBC.

Legal experts claim civil servants could face prosecution. "Individuals may be prosecuted under the Data Protection Act for making an unlawful or unauthorised disclosure," says Lucy Flynn, solicitor at Lancashire firm Backhouse Jones.

"However, the offence is 'knowingly or recklessly' disclosing, so there needs to be an element of fault before a successful prosecution can take place."