>None of the info was encrypted (whatever that means).
Encryption means that the data is encoded into a non-readable script so that anyone trying to read the data would have to break the code or have the password.
>I am fuming as now her identity could be stolen for all sorts of illegal stuff and I don't want the police turning up here to arrest her for something like opening a bank account and money laundering or worse
Believe it or not, having someone's personal and medical data isn't so much of an identity risk. Although there are plenty of companies jumping on the bandwagon who would rather the public think otherwise, to offer identity protection to consumers for a price.
An identity risk is when documents that
prove identity are stolen, such as authentic utility bills, mortgage statements etc, etc; the type of documents lenders ask for when opening a new account. Of course having one's personal data as well as documents that prove identity doubles the risk.
So I wouldn't worry so much, certainly having your daughter registered with CIFAS, being vigilant about any sort of identity proving documents going astray in the post and keeping an eye on her credit reports
http://www.experian.co.uk/creditreport/ will minimise the risk of identity theft.