The loss of 25 million child benefit records, complete with sensitive personal information, was brought about by a “woefully inadequate system” being used by staff who were working on a “muddle through” ethos, a damning report has found.

The 59-page report found that there were “cultural failures” at HM Revenue and Customs (HMRC) and practices at the organisation were “far from what they should have been”.

The Independent Police Complaints Commission inquiry said: “Staff found themselves working on a day-to-day basis without adequate support, training or guidance about how to handle sensitive personal data appropriately.

“The IPCC uncovered failures in institutional practices and procedures concerning the handling of data. It revealed the absence of a coherent strategy for mass data handling and, generally speaking, practices and procedures were less than effective.”

Gary Garland, the IPCC Commissioner, could not rule out that the personal information, including names, addresses, National Insurance numbers and bank details of child benefit claimants, had fallen into criminal hands.

Despite Scotland Yard sending in their specialist search teams, the discs, which disappeared in October last year while on their way from an HMRC office in the North East to the National Audit Office, have never been recovered.

The report found that an employee at HMRC recalled seeing a colleague place the discs, contained in a large yellow polythene envelope, in the tray at the end of the desks and heard him remark: “That’s it - it’s gone now.”

They had been put into the internal post by a junior official via the courier TNT which operates the HMRC’s post system. The package relating to 7 million families was not recorded or registered.

Six days later, on October 24, the NAO told HMRC it had not received the data. The staff hoped it had been delayed by postal strikes and decided not to tell senior officials.

A second copy of the data was then also sent by HMRC to the NAO, again in breach of procedures. This time the package was sent by registered post and arrived safely.

Senior management at HMRC were not made aware of the loss until November 8 and, two days later, Gordon Brown was told and ordered an immediate investigation.

The information was sent to the NAO as part of an audit they were doing on the £10 billion expenditure on child benefit.

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