Tony McNulty, the Home Office minister responsible for the project, said ID cards would not solve the problems of terrorism or fraud.
In its "enthusiasm" the Government had exaggerated the benefits to the state rather than for "the individual in providing a gold standard in proving your identity", he reportedly told a private seminar in Whitehall.
However, Mr McNulty reiterated that the Government remained committed to implementing the scheme.
Speaking to a left-wing think-tank, he said: "There are now so many almost daily occasions when we have to stand up and verify our identity."
He conceded that ID cards could help where fraud was "part of the equation" but would not fully eradicate such incidents.
Ministers will also bid to restore public confidence in the scheme by announcing a "ceiling" on the cost of each ID card after speculation it could be up to £300, Mr McNulty said.
The Government saw its majority of 67 cut to 31 by a rebellion of 20 Labour backbenchers against the ID Card Bill at its second reading in the House of Commons in June.
Further resistance was expected when the Bill reaches the House of Lords.
Mr McNulty told the think-tank that plans to make the cards compulsory would reach deadlock between the Commons and the Lords.
He warned it was "an algorithmic recipe for deadlock because it does not resolve the situation if one house says yes and the other says no".
Speaking on the BBC Radio 4 Today programme, Liberal Democrat chairman Simon Hughes said that authorities do not find it difficult to determine who someone is but rather to discover if they did something or not.
"If we have this money to spend, think of the events of the last month.
"The alternative must be that we have better intelligence or more police or a better border force," he said.
"Let's spend the money on the sorts of things that really give security, not on something that gives an illusion of security but actually won't do most of the jobs at all."
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