THOUSANDS of illegal immigrants have been issued with National Insurance numbers, after officials were instructed to ignore misgivings about their legal status to work in Britain.

The revelation that Jobcentre staff had for six years been told they had a duty to issue NI numbers - even if they suspected documents were forged - has triggered a fresh crisis of confidence in the government's handling of immigration and welfare.

Ministers were forced last night to announce an overhaul of the laws governing NI to toughen up the issuing process.

But the government was accused of dodging questions about how many migrants had been refused NI numbers.

John Denham, the former Home Office minister, posed the question to officials two months ago, but had been given a "misleading" reply, he said.

Although Jobcentre officials were told to pass on any suspicious applications to the Immigration and Nationality Directorate after issuing the NI number, the Home Office could not say how many of the 3,300 migrants had been prosecuted.

The Conservatives seized on the lack of figures as evidence of "a massive hole in our systems", warning that it undermined confidence in the welfare system. David Davis, the shadow home secretary, said: "This is not just a massive administrative failure; it is a massive failure of political will to get a grip on this."

A memo from Jobcentre Plus told staff: "Where DWP [the Department of Work and Pensions] is satisfied as to the individual's identity, an NI number would be issued in this situation even if we have suspicions around his immigration status.

"Any prosecution action in respect of falsified immigration documentation would be the responsibility of IND [the Immigration and Nationality Directorate] - NOT DWP."

The Department for Work and Pensions said it decided last month to close the "long-standing loophole", but the announcement was only made last night as the controversy came to light. But ministers could face further questions after David Ruffley, the shadow minister for welfare reform, vowed to make Freedom of Information requests to discover when John Hutton, the Work and Pensions Secretary, learned of the practice.

"The Department of Work and Pensions has a shambolic record for overpaying and underpaying genuine claimants. Now it is allowing people to claim benefits who have no right to them," he said.

"John Hutton leads a dysfunctional department and it is time he answered these questions on abuse of the system."

But Jim Murphy, the Labour MP for East Renfrewshire, dismissed the attacks as "disingenuous", adding that the government was trying to take action on a decades-old system that was in place under the Tories.