THE Government was accused yesterday of playing on people’s fears by producing hugely inflated figures on the cost of identity fraud.

In a report published yesterday, the Home Office said that the annual cost of ID fraud had reached £1.7 billion. However, this figure was undermined by Apacs, the group that represents payment organisations such as banks and credit firms, which said that the cost had been grossly overestimated and that its own figures had been misrepresented.

Ministers included in their total the figure of £395 million as the annual cost of money laundering alone. But the Home Office admits that this figure is only “for illustrative purposes” and that “no figures are currently available on the proportion of money laundering that relies on identity fraud”.

Furthermore, the Government claims that Apacs puts the cost of ID fraud linked to plastic cards at £504 million a year. But a spokeswoman for Apacs said that the real figure was less than £37 million. “The £504 million is the total losses for plastic cards. It is not just identity fraud on cards,” she said. “Within that overall figure there will be some cards stolen in the post, some skimmed or cloned, some lost or stolen.”

Asked why the Home Office used the larger sum, she said: “I just think they think it is a good story to scare people with.”

Andy Burnham, a junior Home Office minister, said that ID fraud was costing each person £35 a year. “Identity fraud underpins criminality right across the spectrum, from benefit fraud to money laundering through to terrorism and more serious crime,” he said.

Opposition parties and opponents of identity cards ridiculed the Home Office statistics. Edward Garnier, a Conservative home affairs spokesman, said: “ID cards will not combat ID fraud — they may well make it worse. Instead of playing on people’s fears about ID fraud the Government should take the £15 billion the ID card system would cost and spend it on effective measures that will actually reduce fraud and combat terrorism.”

Alistair Carmichael, the Lib Dem home affairs spokesman, said: “It is impossible to see how an ID card would reduce credit card fraud unless we are going to be expected to show our ID card every time we make a purchase.”

Ministers are heading for a battle in the Commons over a series of changes in the Lords to the controversial Identity Cards Bill. One of the most contentious issues is the nature of the proposed voluntary scheme. The Government’s plan to force everyone renewing or applying for a new passport to pay up to £30 extra for an ID card was thrown out by peers in one of five serious defeats for the Bill.

The Lords also inserted a guarantee into the Bill that the Government would have to secure fresh primary legislation before making the scheme compulsory.

The temperature has been raised by remarks in the past few weeks from ministers that they want a compulsory scheme. Labour’s manifesto promised that ID cards would “roll out initially on a voluntary basis”.

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