FRESH evidence that Tony Blair’s flagship identity cards scheme is in crisis is disclosed in a confidential Home Office report which has been leaked to The Sunday Times.

The 32-page “restricted” document says that the security system protecting the card and the national database could be infiltrated by criminal gangs involved in identity theft and highlights shrinking public support for the scheme. It also says British firms have no current manufacturing capacity to produce the card.

The report, entitled Market Soundings, flatly contradicts recent public reassurances to MPs by Joan Ryan, the minister responsible for ID cards, that the scheme is not facing any problems.

Ryan stepped in for John Reid, the home secretary, during a Commons debate last Monday to repeat the government’s official line that the cards will be launched in 2008. She was speaking after internal Whitehall e-mails, obtained by The Sunday Times two weeks ago, showed that senior officials believed the scheme might be delayed “for a generation”.

Responding to a question from Nick Clegg, the Liberal Democrat home affairs spokesman, about the programme’s vulnerability to fraud, Ryan said: “I hope to be able to publish our findings shortly and they will give him [Clegg] the reassurance that he requires, as well as reveal the widespread public support for the ID card system.”

However, the Market Soundings document to which Ryan refers says nothing of the sort.

It cites one manufacturer saying: “In New Zealand the lifetime of the card and chip was reduced from 10 to five years, since holding information for 10 years on a card could be dangerous as criminal activities may be able to defeat chip security within these time scales.”

Ryan’s claim to MPs that the document revealed “widespread public support for the scheme” is also contradicted. Summarising the “main risks” given by the 15 surveyed firms as to why they might not bid to develop the cards and national identity database, the report says: “Recent indications show that the British public’s appetite for the ID card is declining. Association with the resulting programme may compromise a company’s public image.”

Clegg said: “This suggests that government ministers are increasingly living in a parallel universe on ID cards. They claim there’s public support when we know it’s dwindling.

“They claim it’s insulated from fraud when its own analysis suggests it’s much more susceptible to access by criminals. Ministers are displaying King Canute-like powers of self- delusion.”

David Davis, the shadow home secretary, said: “This demonstrates the utter confusion among ministers about their own case. They don’t actually understand it when they are warned that the public are losing faith in the system and as a result the private sector will quite reasonably run away from it.”

The latest embarrassment for ministers follows an admission by officials in the earlier leaked e-mails that the whole scheme could be doomed.

One of the most damning remarks in the new report is the disclosure by some manufacturers that they are in no position to make ID cards. They also said it might not be possible to produce enough iris cameras that will match the user’s “eyeprint” to their digital record on the national database.

The companies asked by the Home Office to give their confidential views on the project included BT, IBM, Motorola, Royal Mail and Siemens. They were also asked if they intended to bid for contracts to develop the system.

Additional reporting: Anna Mikhailova

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