The Government is accused of a 'casual attitude' towards the risk of variant Creutzfeldt-Jakob Disease (vCJD) being spread from contaminated instruments, including during dental surgery.
The low number of vCJD cases in recent years was being used as 'justification for inaction' at a time of public spending cuts, the Commons science and technology committee concluded.
But its report urged a more cautious approach until more was known of the risks, warning: 'No evidence of harm is not the same as evidence of no harm.'
And Andrew Miller, the committee’s Labour chairman, said: 'Around one in 2,000 of us could be unknowingly carrying the infectious prions responsible for the condition.
'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.'
Mr Miller added: 'Recent policy seems to have been driven less by precaution than by economic prudence and a hope that the storm has now passed.'
The stinging criticisms – predicted by Dentistry in June – follow warnings, dating back a decade, that patients undergoing routine dental treatments can be exposed to vCJD infection.
During the inquiry, Professor Collinge, of the MRC Prion Unit at the UCL Institute of Neurology, said the Government had funded £10m of research into instrument decontamination.
The professor’s own research programme had come up with 'several solutions', including a 'biological washing powder', which decontaminated metal very effectively at 50°C.
But, he said, Department of Health (DH) officials and hospitals resisted having to 'change our working procedures', by carrying out a pre-soak.
The committee’s report acknowledged that no cases of vCJD transmission via surgery had been 'conclusively demonstrated'.
But it raised the alarm over the extent to which decontamination guidance issued by the Advisory Committee on Dangerous Pathogens (ACDP) is being followed.
The inquiry was told that a 2011 study found the guidance had only been 'fully implemented' in just 19% of the organisations audited.
And it concluded: 'This response appears to rest heavily on guidance that, based on the available evidence, may not have been fully implemented.
'We ask the Government to provide us with an update on this work, well before the dissolution of Parliament, together with an indication of the steps it will take if preliminary findings suggest that implementation has been incomplete.'
A DH 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.'