Darling blames officials for data loss

Chancellor of the exchequer Alistair Darling has said employees of HM Revenue & Customs were responsible for the loss of sensitive child-benefit data.

Darling confirmed that two discs containing details on about 25 million people had been lost in the post after officials had failed to follow the proper procedures for data handling.

The incident has led to the resignation of Paul Gray as chair of the organisation.

In a statement to the House of Commons on 20 November, 2007, Darling confirmed that two password-protected discs had been sent to the National Audit Office (NAO) for auditing purposes in mid October but had not arrived. Officials sent a second pair of discs that were delivered to the NAO, but it took nearly a month before senior officials and then the chancellor were informed of the loss.

The discs include benefit records affecting 25 million people and 7.5 million families, and include names of recipients and children, dates of birth, bank and building society details and national insurance numbers. Darling said there was not sufficient information to access bank accounts, but that he regarded the incident as very serious.

"I regard this as an extremely serious failure by HMRC in its responsibility to the public," he said.

He insisted, however, that the department already had procedures in place to prevent the copying of such details onto disc, and that these had been broken by officials.

"HMRC has clear instructions and procedures," he said. "The problem here is that the individuals concerned ignored them."

He said he was made aware of the loss on 10 November, immediately launched an internal investigation, and four days later called in the Metropolitan Police. This investigation is still taking place, but so far has uncovered no evidence of any fraud or misuse of the data.

"The police have no reason to believe the data has found its way into the wrong hands," Darling said.

He informed banks and building societies through the Financial Services Authority days before the announcement to Parliament so they could take protective action. They have analysed relevant accounts and will continue to monitor them. He added that if anyone becomes the victim of fraud due to the data loss they will be protected by the Banking Code and will not suffer financially.

Darling also said it had been discovered that HMRC officials sent similar data to the NAO earlier in the year, although this was received and returned. He has kept the information commissioner informed, and says it is possible the department breached the Data Protection Act by preparing and sending the discs.

Among the consequences is that the NAO is reviewing its procedures for collecting data. Edward Leigh MP, chair of Parliament's Public Accounts Committee, said he had already established that the NAO only asked for the national insurance numbers, not all of the details that were on the discs.

Conservative shadow chancellor George Osborne described the incident as a "catastrophic mistake", and claimed "half the country will be very worried about the safety of their families".