The Government has questioned the account of Sir John Bourn, the head of the National Audit Office, who claimed that senior managers at HM Revenue and Customs were involved in a practice that led to the personal details of 25 million people being lost in the post.

Sir John has alleged that senior managers at the Revenue not only knew of, but approved the policy of sending whole unedited databases of sensitive personal details through the post.

HMRC senior staff had even justified the practice to him by saying that it was "too expensive" to edit out the sensitive details from the database, leaving only the basic details that his officials had asked to see, Sir John is believed to have told the Chancellor.

The internal disagreement at the heart of Government over the catastrophic data leak emerged last night after the Conservatives obtained details of the row and made them public.

The Treasury today responded to the allegations, saying that there were some factual inaccuracies in the details put out by the Conservatives.

Neither the Treasury nor No 10 would, however, say what the inaccuracies were. They claimed that as a review was now ongoing, it would be inappropriate to explain.

Sir Edward Leigh, the Conservative chairman of the Public Accounts Committee, which saw the briefing paper which Sir John wrote to the Chancellor outlining his concerns, is also now refusing to comment on the row, citing the review.

Sir John is reported to have told the Chancellor that after a previous request in March for the NAO to be sent data with sensitive details like bank account numbers removed, he received an e-mail from a senior business manager at HMRC, copying in an assistant director of the Revenue, saying that the data would not be "desensitised" because it would require an extra payment to the data service provider EDS, the private company with the contract to manage the Revenue's computer data.

The Government is under pressure to release the remit of the review being conducted by the chair of PricewaterhouseCoopers in to HMRC, amid concerns that it may not try to assign blame to any individuals and focus instead on the systems in place.

A Downing Street spokeswoman said they would focus on "all the procedures".

The review was commissioned by the Treasury, and a copy will be sent to the Information Commissioner who will decide what enforcement action can be taken.

The latest twists in the saga of the missing data came as Labour backbenchers admitted that the Government is facing a crisis of confidence.

John McFall, chairman of the House of Commons Treasury Committee, who is a Brown loyalist, told BBC Radio 4’s Today programme: "I think there is a serious issue here in terms of confidence in the Government, and that has to be restored.

"The core issue is competence. I think there is a challenge here now for Gordon Brown in terms of leadership.

"He has been good in crises since he took over. This is a crisis. Can he fix this department? Can he ensure it is fit for purpose? Can he ensure people have confidence in it?"

He continued: "Is there a fatal flaw in Government? I don’t think there is, but is it time for iron to get into the body politic? It is, and that is for Gordon Brown to do."

Kenneth Clarke, meanwhile, the former Conservative Chancellor, said that the Labour Government was beginning to remind him of the crisis-prone last years of John Major’s administration.

Looking back to his time in Major’s Cabinet in the 1990s, Mr Clarke told Today: "Every week, we would think ’We can’t have anything go wrong like this next week, we are bound to have an easier time’, and then something would go wrong.

"They are having a series of disasters."

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