Everyone who receives child benefit is under threat of fraud after a catastrophic blunder by civil servants.

Two computer discs packed with the personal and banking details of 25million people - nearly half the UK's 60million population - have disappeared in the post.

Last night, Chancellor Alistair Darling was trying to head off a consumer panic after he admitted that nearly every family in the country is at risk. Police were ransacking offices in London and the North East for the missing CDs, but insisted there was no evidence they have fallen into criminal hands.

The discs, which include names of parents and children, their dates of birth, addresses and National Insurance and bank account numbers of all those who claim Child Benefit, had only minimal computer protection and could be easily hacked into by gangsters.
Gordon Brown and David Cameron are among the parents whose bank details are at risk, along with Cabinet ministers and celebrities.

A joint Treasury operation with the banking industry last week put all affected accounts under surveillance. But banks, including Barclays, said total protection from fraud could not be guaranteed.

Haunted by memories of last month's run on Northern Rock, Mr Darling pleaded for those affected not to rush to close their accounts. Confidence was further undermined as he confirmed that the giant HM Revenue and Customs department - which holds the details of every taxpayer and benefit claimant - has suffered a string of information blunders in the past year.

The latest glaring breach of data protection rules saw the information downloaded from HMRC computers in Newcastle following a request from the National Audit Office.

The two discs were put into HMRC's internal mail system on October 18 without being registered, and sent to the National Audit Office in London, but they never arrived.
A further copy of the data was sent by registered post, and this package did not arrive at the NAO. The loss of the first package was not reported to HMRC management until November 8, three weeks later.

Mr Darling said he was informed on November 10, and he told Gordon Brown half an hour later. On November 14 he ordered Mr Gray to call in the police.

The revelation raised new questions about the Chancellor's credibility, already battered by the Northern Rock fiasco. The Tories stopped short of demanding his resignation, but called on him to "get a grip".

It also put a question mark over the future of the Government's ID cards scheme as MPs warned that the Government could not be trusted with detailed personal information.

And it reinforced a growing impression at Westminster that, after a confident start in the summer, Gordon Brown's administration is now lurching from crisis to crisis.

HMRC chairman Paul Gray took some pressure off the Chancellor yesterday when he accepted full responsibility for the latest scandal and resigned from his £170,000-a-year post. MPs gasped in astonishment as a visibly shaken Mr Darling mapped out the scale of the crisis in an emergency statement to the Commons

The Prime Minister and senior members of the Cabinet put on a show of support for Mr Darling by joining him on the front bench.

The Chancellor apologised for the "anxiety" faced by the 7.25million families who receive Child Benefit payments, and urged them to check their bank accounts. However he said there was no need to change accounts.

"The police tell me that they have no reason to believe that this data has found its way into the wrong hands," he said, adding that any cash losses would be covered by banks.

The Metropolitan Police is leading the search for the discs to establish how they went missing. At least five separate inquiries have been launched in addition to the main one being led by Scotland Yard.

The Independent Police Complaints Commission and the Information Commissioner are running separate investigations into loss of personal information, while HMRC and the NAO are reviewing what they admit are catastrophic breaches of their internal procedures.

A disciplinary inquiry is under way to identify possible wrongdoing by HMRC staff, in what some were last night describing as an example of "criminal incompetence".

The HMRC official who sent the CDs did not tell senior officials about the loss at once because he or she assumed the package was delayed, possibly by the postal strike, and "hoped that it would turn up" and so kept quiet, an HMRC spokesman said.

The private courier firm TNT, which handles 100,000 pieces of internal mail a day for HMRC, said it could not trace the discs because they were not registered.

Mr Darling has also ordered an independent inquiry into HMRC security procedures by PricewaterhouseCoopers chairman Kieran Poynter.

A spokesman for Mr Brown said he retained "full confidence" in Mr Darling, who did not offer his resignation.

A former employee at HMRC said people as young as 18 were being employed with little or no qualifications.

Until last year, when they made it compulsory for applicants to have at least five GCSEs, people were just walking into the jobs," she said.

About 7.25million families receive Child Benefit, which is usually paid to the mother. But they have to provide information about each child and the parents, which means the names of 15million children and 10million adults are included on the HMRC database which has gone missing.

Massive cuts to HM Revenue and Customs' budget were yesterday being blamed for contributing to the child benefit records blunder.

A senior member of the Commons Treasury Select Committee said HMRC was operating under "extraordinary pressure" after Gordon Brown ordered job cuts in a Whitehall savings drive.

Michael Fallon, Tory deputy chairman of the committee, said the merger of the Inland Revenue and Customs and Excise in 2005 and a 5 per cent reduction in its budget had put officials under immense strain.

HMRC was immediately ordered to trim 25,000 of the 94,000 total merged staff, cutting costs year-on-year, while simultaneously ordered to improve services.

Only last month the Institute of Chartered Accountants delivered a damning verdict saying the two targets were at odds.

Yesterday's revelations fuelled fresh questions over whether Mr Brown's creation of the "monster" department had been a step too far.

It collects taxes and other Government receipts worth around £400billion a year. It also administers the complex web of benefits and tax credits evolved during Mr Brown's years at the Treasury which means it has to process huge quantities of everchanging personal data.

It has responsibility for all the duties and taxes on goods such as petrol and alcohol, and has the anti-smuggling role of the old Customs and Excise.