A "casual" attitude by the Government could be increasing the risk of the human form of "mad cow disease" being spread via blood transfusions or in operating theatres, MPs warned.
The House of Commons Science and Technology Committee said the low number of variant Creutzfeldt-Jakob Disease (vCJD) cases in recent years was being "used as justification for inaction" at a time of public spending restraint.
But with research suggesting tens of thousands of people may unknowingly be carrying the prion responsible for the disease and 43 NHS patients may have been exposed to infection during surgery in recent years, ministers had a responsibility to return to a more cautious approach until more was known of the risks.
The committee's chairman Andrew Miller warned that the Government's approach was "far less precautionary" than in the past and policy appeared to be "driven less by precaution than by economic prudence".
CJD is a neuro-degenerative disease resulting in symptoms similar to dementia, which is always fatal, usually within a year of infection. The variant form shares many of the same symptoms but tends to affect younger people and result in a longer period of illness before death.
Some 177 deaths in the UK have been attributed to vCJD since its identification in 1995 in the wake of the epidemic of bovine spongiform encephalopathy (BSE), with the majority of deaths occurring between 1996 and 2003.
But Public Health England told the committee that on 43 occasions between 2010 and 2013, surgical patients may have been exposed to the illness because infection control guidance was not properly followed.
In many of the cases, the infected patient was not diagnosed with CJD at the time of surgery and enhanced precautions were therefore not thought necessary.
Prions - infectious agents in protein form - are known to bind strongly to metal surfaces, meaning that normal cleaning methods do not remove them from surgical instruments.
Evidence to the inquiry suggested that Government guidance on the prevention of prion transmission "may not have been fully implemented across the NHS".
Mr Miller said: "It is known that CJD can be transmitted through the use of contaminated surgical instruments, but the Government's response to this threat has been insufficient.
"It has failed to support development of a technology capable of eliminating this risk and instead chooses to rely on guidance which it knows is only partially effective. And evidence suggests that this guidance is not even followed in some parts of the NHS."
Meanwhile, concerns were raised that prions could be transmitted from an undiagnosed CJD carrier to other patients through blood transfusions.
Only four cases have been confirmed of vCJD transmission via infected blood, all in the 1990s. But the committee voiced concern that prions could still be present in the blood supply and "silent infection" from donors who have not yet displayed symptoms of CJD could be "widespread".
"We know that vCJD can be transmitted via blood transfusion because it has happened in the past, and we have reason to believe that prions may still be present in the blood supply, so there is a chance that it could happen again," said Mr Miller.
"However, in the absence of a reliable vCJD blood screening test, we are unable to discard those donations that might be dangerous."
He warned it would be a "false economy" for ministers to cut off funding for Medical Research Council studies on a new blood test to spot the prion.
Mr Miller said: "Variant CJD is a terrible disease and thankfully cases are now rare.
"However, research suggests that around one in 2,000 of us could be unknowingly carrying the infectious prions responsible for the condition. This raises the worrying prospect that these prions could be transmitted to others via blood transfusions and other medical procedures."
"There remains significant uncertainty about the magnitude of this risk and the Government therefore claims to be taking a precautionary approach. But our inquiry has shown that its attitude towards vCJD today is far less precautionary than it was in the past.
"Indeed, recent policy seems to have been driven less by precaution than by economic prudence and a hope that the storm has now passed. This optimism is not supported by the available evidence."
Scientists were divided about the need for action on vCJD.
Professor Sheila Bird, programme leader at the MRC's Biostatistics Unit, welcomed the committee's recommendations - including registration of those at risk of vCJD infection and a large-scale trial of the new blood test within 12 months - which she said would "put UK's surveillance of sub-clinical vCJD firmly back-on-track".
But David Brown, Professor of Biochemistry at the University of Bath, said: "The response required at this point in time should be in line with the current threat.
"While recent data has suggested that a small percentage of people carry some amount of abnormal prion protein, the reality is that we do not know its origin or cause. This should be combined with the current incidence of vCJD which is now thankfully zero.
"If this situation has been reached without additional screening or preventative measure then the reality is any further measures are likely to have no impact at all."
John Hardy, Professor of Neuroscience at University College London, said: "Mad cow disease and new-variant CJD were a disastrous consequence of poor animal carcass handling procedures in the late 1980s amplified by a lax government response to diseased meat reaching the human food chain in subsequent years. We were fortunate that the problem only killed in total about 200 people.
"Clearly, vigilance needs to be maintained to prevent the disease's re-emergence through medical infections and it is appropriate the Commons committee is maintaining scrutiny of this important issue."
A Department of Health spokesman said: "vCJD is a devastating disease that we take extremely seriously. That is why we are providing ring-fenced funding of over £5 million each year for research and surveillance.
"We are continuing work with independent experts and researchers to make sure any risk to the public is minimised, especially in relation to blood tests and instrument decontamination. We will respond to the report fully in due course."