Whitehall's spending watchdog is considering an investigation into allegations that organised criminal gangs have paid civil servants to "steal" thousands of people's identities.

The National Audit Office confirmed yesterday that it might begin an inquiry into claims that fraudsters were using the personal details to swindle millions of pounds out of the tax credit system.

It emerged at the end of last year that the identities of up to 13,000 civil servants from the Department for Work and Pensions had been stolen and used in tax credit fraud. However, there are concerns that this may be only a small part of a much wider problem, according to Richard Bacon, a Conservative MP on the public accounts committee.

He has written to Sir John Bourn, the head of the NAO, urging him to investigate the scale of identity theft at both the Department for Work and Pensions and HM Customs and Revenue.

"Obviously, 99.9 per cent of civil servants will be honest but it only takes a tiny minority to be working with criminals and passing on details for there to be a very significant problem," he said.

Between April and November last year about 40,000 new applications for tax credits and 22,000 existing claims were stopped because of suspected fraud. The Government had to close an official website that allowed people to apply for tax credits online because it was being targeted by criminals.

Civil Service unions accused the Government of leaving the system wide open to fraud by cutting the number of staff responsible for checking tax credit applications.

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