Home Secretary Jacqui Smith is placing the private sector in charge of gathering the biometric details of anyone who applies for a passport or the controversial new cards.
People will have all ten fingerprints and their face scanned.
The hugely sensitive biometric data will then be passed on to the Government's Identity and Passport Service for inclusion on the new National Identity Register.
Separately, the applicant will fill in a form to request a passport or ID card. They will undergo full identity checks and will only be issued with their card or passport once this is complete.
The card - being displayed by Miss Smith, right - will contain a microchip with an image of two fingerprints and the facial scan.
The Home Office said firms have to pass rigorous security checks to win a contract.
Fingerprints would be recorded using Government computers and would not be stored on memory sticks or sent in the post on CDs.
But it is unprecedented for members of the public to give all ten fingerprints to a private company. At present, the right to take fingerprints is largely restricted to the police.
The Home Office, which had planned to take fingerprints itself, says the move will cut costs by as much as £1billion.
In a report today, it admits the £4.5billion bill is creeping towards £5billion.
Introducing ID cards for foreign nationals will add to that.
ID cards and passports will contain the same information, but will exist side by side. The ID card could be used as a passport, but only in the EU. People travelling elsewhere will still need a passport.
But critics warned of the risk of personal data being lost by the private sector. In recent months, contractors have suffered a string of embarrassing losses - including memory sticks and hard drives containing the personal details of prison officers and tens of thousands of the country's worst criminals.
One of the firms involved, PA Consulting, is already working as a 'delivery partner' on the ID cards project.
Last night, Shadow Home Secretary Dominic Grieve said: 'The Home Secretary's determination to press ahead with a project that will put the personal data of every citizen at risk is reckless in the extreme.
'Experts have told her that the idea of ID cards as a security measure is "bunkum", not a week goes by without sensitive information being recklessly lost and - to cap it all - the costs of ID cards are enormous.
'At a time of economic hardship, how can the Government seriously expect the public to pay out billions for this expensive white elephant?'
Originally the Government was to use up to 80 regional offices fitted with scanning machines where applicants would be interviewed before their data was collected and sent to a vast national computer database.
This network of offices still exists, but will now be used to interview first-time passport applicants.
Those who may bid to do the work instead include Royal Mail, which operates Post Office counters, and firms with a major high street presence such as Boots. The process will be overseen by an ID Commissioner.
But Phil Booth, of the NO2ID campaign, said: 'Why has the Home Office spent millions already for its own chain of Identity and Passport Service enrolment centres? How can such a procedure be made secure? And who would be crazy enough to bid, given the guaranteed unpopularity of fingerprinting the public?'
The Identity and Passport Service said: 'The security of customer data is our utmost priority. We would never jeopardise the integrity of a person's biometric data. Any third party would be accredited and audited to ensure they meet robust and strictly administered security standards. continues here
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