Charles Clarke has suffered damaging defeats on his legislation to introduce identity cards.

As the Identity Cards Bill was considered in the Lords, the home secretary appealed for support in the Commons.

But peers inflicted two serious setbacks on the Bill.

In the first vote on Monday evening they decided by 237 votes to 156 to block the scheme until more information is made available about the likely costs.

An influential report from the London School of Economics has suggested the scheme could cost up to £19bn, though ministers insist that is more than three times their own estimates.

Home Office minister Baroness Scotland said the amendment was "flawed", and the government is now likely to seek to overturn it when the Bill returns to the Commons.

There was a second defeat for the government when peers voted by 206 to 144 to demand a secure method of recording and storing personal data.

The Liberal Democrats and the Conservatives had expressed disquiet about the proposed system and spoke out against the measure in the Lords debate.

Fraud

Speaking in the Commons earlier in the day, the home secretary said the scheme would help in the fight against crime.

"Identity fraud costs the economy at least £1.3bn a year and the evidence shows that the threat is rising," Clarke told MPs.

"The ID card scheme will tackle the problem by recording biometric information so that we are able to detect people who try to register multiple identities to commit fraud or for other worse purposes."

He added: "As the arguments about both costs and about the security of the system and the need for it have become more widespread and better understood, support for ID cards has increased.

"It is a critical measure to enable us to provide security for the people in this country and we shall proceed with it."

Criticism

In a further blow to the government, a report from the London School of Economics, released on Monday, questions why ministers have been unwilling to answer detailed questions on their plans.

It says that ministers "have not encouraged the kind of rational debate that proposals of this far-reaching nature surely require".

"Dozens of questions about the scheme's architecture, goals, feasibility, stakeholder engagement and outcomes remain unanswered," says the report.

"The security of the scheme remains unstable, as are the technical arrangements for the proposal. The performance of biometric technology is increasingly questionable.

"We continue to contest the legality of the scheme. The financial arrangements for the proposals are almost entirely secret, raising important questions of constitutional significance."

The report also says that the researchers are "extremely concerned at the ongoing culture of secrecy endemic in the planning of the identity cards proposals".

"The Home Office has conducted most of its work in a covert fashion, refusing to disclose information that would inform debate, and conducting negotiations in a closed environment," say the academics.

"This process is inimical to the creation of trust. This situation also makes further research on the proposals impossible."