The cost of implementing ID cards in the UK has risen by 37 per cent in the past six months, but the government claims that it is reducing overall costs.

Outsourcing biometric collection data, and cutting other costs, can reduce the overall cost of the system from £5.43bn to £4.57bn, according to the Identity Cards Scheme Cost Report May 2008.

"In order to enrol fingerprint and photograph biometrics in the most convenient and cost-effective way, we now plan to provide this through the open market," the report said. "This will result in a cost reduction."

The move will mean that government passport offices will no longer collect biometrics and that private contractors will bid to do the job instead. The report does not say what will happen in areas where no private bid is made.

Phil Booth, national coordinator at campaign group NO2ID, said: "We are used to the Home Office's blatant creative accounting, but this is staggering. It now appears to have junked the primary pretext for the scheme. So what is it for?

"Ministers repeatedly asserted that ID registration would involve checking everyone individually and taking their fingerprints.

"Dropping interrogations and fingerprinting for all may knock £1bn off the latest fantasy figures, but it scraps even this fairy-tale notion of security. They are rushing round and round in circles. It is a farce."

A committee of academics from the LSE examined the proposed ID card plans three years ago and found they would cost four times the government's estimates. The cards would cost over £300 each if the full cost was passed on.

Papers released with the government report paint a grim picture of the overall state of the project.

A report by the government-appointed Independent Scheme Assurance Panel, comprising senior information managers from organisations like Nokia and Cranfield University, suggests that the scheme is in dire straits.

The Panel concluded that the scheme still lacks a "robust and transparent operational data governance regime and clear data architecture".

In addition they express fears of unauthorised accessing of data by staff, following the revelation that over 600 HM Revenue & Customs staff had been disciplined for precisely this offence.

"No specification, no departmental buy-in, no rationale for key design decisions and no ministerial control. This is official confirmation that the Identity and Passport Service is a runaway train," said Booth.

"As we pointed out back in January, Gordon Brown should pay attention to the detail. Ministers are rubber-stamping a consultant-driven scheme of epic proportions."

• Identity Cards Scheme Cost Report May 2008 (PDF)