More failed asylum seekers are living in Britain than previously thought
The Government is to reintroduce "counting out" at UK borders as a result.
Officials are believed to have discovered that up to 450,000 asylum seekers whose applications have been refused might still be here.
The figure is much higher than an estimate of 283,000 produced by the National Audit Office last year, which ministers insisted at the time was 50,000 too high.
But thousands of "lost" case files have now apparently been found in a recent trawl of the Home Office.
It has not yet been established how many relate to asylum seekers whose applications have failed.
Immigration Minister Liam Byrne said problems with producing figures on the number of people illegally in the UK were "not new".
He said the difficulties had been around ever since the Conservative Government stopped monitoring how many people were leaving the country in 1994.
"That's exactly why you must be determined to count people out. We'll have a lot more to say about that over the next few days," he said.
"That is the direction of travel that I think we need to go in. We need to toughen our borders, and counting people in and counting people out is a basic discipline that we need to reintroduce."
Home Secretary John Reid is expected to give details of the discovery of the files as he announces an overhaul of the Home Office later today.
Shadow Home Secretary David Davis said the upward revision of figures was "extraordinary" given that the Home Office had previously dismissed higher estimates.
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