The Home Office on Wednesday terminated its contract with a private company that lost the details of thousands of criminals, in a decision that cast doubt over the company’s continuing advice to government about its identity cards scheme.

Jacqui Smith, home secretary, said on Wednesday PA Consulting would lose a £1.5m three-year deal with the Home Office after an employee mislaid a computer memory stick that contained confidential data on up to 130,000 offenders and prisoners.