The government has secretly agreed that the "particularly sensitive" personal data of all 43 million drivers in the UK can be contracted offshore to India in a move that will allow the private firm running London's congestion zone to cut costs and make more money.

Data from the Driver and Vehicle Licensing Agency, including addresses and registration plate numbers, along with credit card details, will now be accessible to staff outside the UK following a review by ministers.

The prohibition was rescinded after IBM, which runs the congestion charge zone for Transport for London (TfL), lobbied for a change. The company has been repeatedly fined since it took over the contract from Capita in 2009, making the £60m deal less profitable than it had hoped.

However the move to relax the rules around the sensitive data, which has not been publicly announced, raises concerns in the build-up to the London 2012 Olympics about the increased risk of fraud.

It is understood that a risk assessment carried out within IBM has also identified a potential threat to London's reputation should the changes lessen the ability of staff to deal with problems in the congestion zone IT systems. It also warned of the risk to the security of sensitive data.

The move also appears to contradict ministers' recent insistence that they would resist any work on government contracts going abroad.

The transition allowing staff abroad access to the data is expected to be completed by 18 May. An internal email sent by IBM's commercial manager earlier this month, and seen by the Observer, says: "Since go live, TfL has directed that we retain within the UK certain support roles with access to data that they considered particularly sensitive… TfL has recently completed a risk assessment with the DVLA and the Department for Transport and has concluded that they no longer require this additional level of control… As a result we have commenced a transition exercise to manage the changes to our support organisation over the next three months."

Labour MP John McDonnell said he feared the change would cost British jobs. "Despite all past promises from the government, the decision to offshore this sensitive information database will not only cost jobs but open up vast opportunities for fraud. Offshoring the congestion charge operation just as we host the Olympics also risks making Britain the laughing stock of the world as the new system inevitably experiences teething problems."

The Public and Commercial Services (PCS) union said it was concerned that the decision had come just as the government was consulting over whether to close 39 DVLA offices to centralise processes in Swansea.

Richard Simcox, from the PCS, said: "It appears neither IBM nor DVLA were planning to tell anyone about it. The government should call an immediate halt to the DVLA's plans and ministers should explain to MPs and the public exactly what has happened and what are the implications."

A DVLA spokesperson said: "All IT systems must be managed to the same standard as if they were in the UK. We will ensure that all appropriate controls for data protection are in place."

• This article was amended on 18 March 2012 to correct references to birth dates being stored offshore

