Missing: Personal data on half the British population

British trust in the way government stores and secures vital personal information was sorely tested Wednesday after it emerged that sensitive data on about 25 million Britons (almost half the population) was lost in the mail in an unprecedented security blunder.

Computer files on 7.25 million families – everyone with children under 16 – have been missing ever since they were sent on two compact discs through the domestic mail system a month ago by Her Majesty's Revenue and Customs.

It's Britain's worst personal data security lapse, second only to the US government losing data on 26.5 million former servicemen last year. And it comes at a politically sensitive time; the British government is preparing to further centralize data as it roles out national ID cards next year.

Technology experts and privacy advocates say that the mistake will have grave repercussions for the government and its $11 billion identity card program. "If you centralize data, what will fail is the carbon-based life form (humans), not the technology," says Simon Davies, director of Privacy International, a watchdog group. "It's an error on a monumental scale that will have repercussions that will last years."

Ross Anderson, a professor of security engineering at Cambridge University, adds: "The government has been aggregating data centrally, which is wrong from a point of view of privacy, safety, and operational effectiveness."

ID fraud is already one of the fastest-growing crimes in Britain, costing the economy around $3.5 billion a year, and affecting 170,000 people last year.

Prime Minister Gordon Brown was contrite Wednesday in the wake of the debacle, which was first flagged to officials a month ago, but only reported to the public on Tuesday. He told Parliament that British banks were checking for any fraudulent activities, and he quickly announced plans to improve security of personal data at government departments. Mr. Brown insisted that national ID cards would be useful, not detrimental, to the 21st century business of pinpointing identity, noting that 22 out of 25 European countries have some form of ID card system. [Editor's note: the original version misstated the date the leak was reported.]

Officials are telling individuals not to worry unduly about the latest mishap. The missing databank includes names, dates of birth, addresses, national insurance and bank details – but not passwords, meaning that fraudsters would still need additional pieces of the jigsaw in order to hack into bank accounts.

But Mr. Davies warns that the information is enough for artful dodgers to "triangulate" their way to an ID theft.

"The criminal will secure a small amount of basic data – usually much less than what has been leaked on this occasion. He will then build on that knowledge – there is so much information about individuals out there, particularly on social networking sites.

"From there it is possible to complete the 'triangle' by impersonating the individual," he says.

Phil Booth, an opponent of the ID card scheme, says even if the missing discs turn up, it does not mean the scare is over.

"If you are a criminal, the most sensible thing to do would be to copy the discs and then have them turn up again," he says. If the discs fall into the wrong hands, he says the information would likely be sold off in parcels to criminal syndicates.

He warns that this episode is as nothing compared to the catastrophe that would befall the country if the new national identity database were to be compromised. That database will hold far more details about people, such as fingerprints and iris patterns, and will be shared across scores of departments and agencies. The scope for ID fraud, should something go amiss, would be limitless. As Mr. Booth says, "you can change your bank account, but you can't change your fingers."