Alistair Darling was forced to admit to today that the personal details of 25 million people, saved on two disks, had been lost by HM Revenue & Customs.

Speaking in the commons, the chancellor said that the disks had gone missing when a junior HMRC official flouted HMRC procedure by sending child benefit information to the NAO in October through HMRC's internal post system, operated by TNT.

The disks never arrived at the NAO and were not registered or recorded. The disks contain the bank account details, national insurance numbers, addresses and names of 25 million people and 7.25 million families.

Earlier this year the taxman lost a CD containing the details of 15,000 Standard Life pension holders when an HMRC employee's laptop was left in the car boot and stolen.

However, the latest data protection breach has cost HMRC chairman Paul Gray his job.

PricewaterhouseCoopers chairman Kieran Poynter has now been called in by Darling to conduct an investigation of HMRC's document-handling procedures. Poynter will produce an interim report next month and release a full report in the spring.

The profession was left staggered by the news and Gray's shock resignation.

'Whilst I understand the magnitude of the problem relating to the loss of records it is a great shame that it resulted in Paul Gray's resignation because under his leadership HMRC was just beginning to get its act together,' said Richard Mannion, national tax director at Smith & Williamson.