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A Conservative government would have to compensate suppliers of the National Identity Scheme for lost profits as well as costs if it cancelled the project.

"To guarantee these payments knowing that a future Conservative government has already said it will scrap ID cards is improper and quite extraordinary," shadow home secretary David Davis MP told the Financial Times on 24 May 2008, citing the convention that one Parliament may not bind a subsequent one.

Davis wrote to the potential suppliers of the scheme in February, giving formal notice that the Tories would cancel the scheme if elected.

The Home Office told GC News that the contracts include break clauses, which if exercised would mean the government paying costs and an element of lost profits. "It's based on how far the contract has got and various other factors," a spokesperson said, adding that these were standard contractual arrangements following Office of Government Commerce guidelines.

The spokesperson added that "nothing has been created bespoke" to deal with the Conservatives' intentions, and that the figures involved in cancellation are commercially confidential.

The Identity and Passport Service outlined the contracts to build the scheme, which is dominated by three major contracts each worth around £500m, on 23 May. Only the deal to produce identity cards, due to be announced in summer 2009, would be at risk of complete cancellation in the event of the Conservatives gaining power.

The other two, for passport applications and for a biometric database, both due to be awarded early next year, would be reduced in volume and scope if the scheme was scrapped, although both would be required to produce passports containing applicants' fingerprints. These reductions would also trigger compensation payments for vendors, although smaller than those for total cancellation of a contract.

This article was originally published at Kablenet.

Kablenet's GC weekly is a free email newsletter covering the latest news and analysis of public sector technology. To register click here.

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