As if the average person in the UK does not have enough to worry about financially, now we could all be facing a spate of mass fraud.

Yesterday, the government was forced to concede that it had made a fundamental breach of trust to its citizenry, when the Chancellor of the Exchequer Alistair Darling announced in the Commons that discs containing personal details of 7.25 million families claiming child benefit had been lost.

Sensitive information such as dates of birth, addresses, bank accounts and national insurance numbers have all been lost in the post.

There are now fears that we could be facing one the largest ever instances of mass identity fraud and theft from personal bank accounts.

Mr Darling's announcement was met with gasps and looks of incredulity as MPs heard how the discs containing personal information went missing in the internal post after a junior official at HM Revenue & Customs in Washington, Tyne and Wear, breached all government security rules by sending them by courier to the National Audit Office in London.

Millions of people around the country are frightened that savings held in bank accounts could be liable to theft as a result of this blunder.

Treasury ministers have already been desperately trying to calm people down and stave off public hysteria today.

They fear that account holders will rush to change their accounts either in person or on the internet, leading to a second banking crisis similar to that of Northern Rock.

Over the past week there has been a surreptitious police-led search, scouring the city in a frantic attempt to locate the missing discs, which contain information about practically half of the British population.

All banks and building societies in the country have been alerted thankfully, and the public has been told to be vigilant of suspicious attempts to gain access to their bank accounts.

This fiasco comes in the face of renewed calls on the government by the information commissioner, Richard Thomas, to launch an overhaul of data laws and enforce more stringent penalties on those who flout them.

These are very worrying times. With expenses and mortgage payments seemingly rising incrementally by the day, the last thing people need to be worrying that their lifetime's savings will be plundered overnight.

General confidence, though precarious, was just beginning to stabilise after the Northern Rock crisis, general turmoil in the world's financial markets and increasing instability within the UK housing market.

Now, panic is set to hit fever pitch and any day we may see scenes on the news, of worried savers scrambling over themselves to withdraw their money for safe-keeping under their mattresses - just as we saw not too long ago in the aftermath of the collapse of Northern Rock.

The Metropolitan police has already been brought in to investigate the losses, as well as the Independent Police Complaints Commission. An independent government inquiry will also be conducted by Kieran Poynter, the chair of PricewaterhouseCoopers.

This is quite an embarrassing flop for the government and public opinion about the proposed controversial ID card scheme is likely to sour very quickly.