The taxman has moved to prevent taxpayer data being lost to fraudsters by clamping down on the transfer of information by the department.

HMRC staff can no longer transfer taxpayer data outside their offices unless 'absolutely unavoidable' and only then if authorised at director level, securely encrypted and password protected.

A security crackdown in the wake of the missing discs scandal has also resulted in the removal of staff access to CDs and other removable data except following approval at director level.

The emergency steps, which were due to take effect on November 21, were revealed by Treasury Financial Secretary Jane Kennedy at the end of a heated Commons debate on the security breach.

She said HMRC 'has established a central team to handle encryption on behalf of the organisation to ensure the proper level of encryption is used at the proper level'.

Kennedy added: 'HMRC is also investigating the electronic transmission of data. It is consulting with the British Bankers Association and currently undertaking further talks to agree standards for and methods of deploying electronic transfers.'

Her disclosures came at the end of a debate in which the issue of technical security was forcefully raised by Lib Dem shadow chancellor Vince Cable estimated that with one identity worth £60 on the black market, the lost discs contained data were valued at £1.5bn, 'which makes the Brinks Mat robbery the equivalent of stealing the church collection'.

Tory shadow chancellor George Osborne derided the government claim the breach was the fault of a junior clerk in Newcastle, claimed there is now 'growing public concern' about the government's 'insatiable appetite for more personal data on their citizens' and demanded the scrapping of 'flawed' plans for ID cards.

Chancellor Alistair Darling accused him of 'political knockabout'.