Jacqui Smith, the Home Secretary, has sacked the firm that lost the personal details of the entire prison population, and information on thousands of offenders.

Ms Smith terminated the £1.5 million contract with PA Consulting and is conducting a review of other Home Office contracts with the firm. But its deals with other government departments are not to be reviewed.

Ms Smith said: “Our contract had stipulated the sort of security provisions that needed to be in place and that had not happened.

“Our investigation has demonstrated that while the information was transmitted in an appropriately secure way to PA Consulting and fed to a secure site, it was subsequently downloaded on to an insecure data stick and that data stick was then lost.”

Cancelling the contract will not cost the taxpayer any money and expenses incurred will have to be met by PA Consulting, she added.

An analyst left the memory stick in an unlocked drawer in an unsecured office at the firm's offices in Victoria, Central London. It is alleged that when she returned to work after a weekend away the memory stick was missing. The woman and the rest of the team working on the Home Office project have been dismissed. PA consulting would not say last night how many staff had been dismissed as a result of the data loss.The blunder has raised further doubts about the Government's controversial ID card project, in which PA Consulting has been involved.

Ms Smith said: “I think (PA Consulting) recognise that what they have done is against the terms of their contract.”

An internal Home Office report into the incident, published yesterday said: “The investigation into the memory stick loss indicates that it is most likely that the memory stick was stolen by an opportunistic thief for the value of the stick when it was left in an insecure location in PA Consulting Group's offices.

“It is likely that its value and the fact that it could be easily concealed made it attractive to a potential thief.”

There was a “low overall risk” to public protection, it concluded.

PA Consulting has six other contracts with Home Office bodies including the Serious Organised Crime Agency, Security Industry Authority, Identity and Passport Service, UK Border Agency and National Policing Improvement Agency.

A spokesman from PA Consulting said: “We deeply regret this human failure and apologise unreservedly to the Home Office. The loss of data on this project was caused by human failure, a single employee was in breach of PA's well established information security processes.”

Times Recommends

• Should Knox’s trial even have reached the courtroom?
• All that glitters is not sold in Wright’s world
• Believe it or not, Big Brother is your friend