MPs have queued up to demand the government scraps its £330m NHS contract with the spy-tech company Palantir, calling it “dreadful” and “shameful” in a debate on Thursday, after which the government said it was “no fan” of the US company’s politics.

Labour and Liberal Democrat MPs led the calls for Palantir, which also works for Donald Trump’s ICE immigration crackdown and the Israeli military, to be removed as a supplier to the NHS federated data platform (FDP), with one Labour backbencher, Samantha Niblett, questioning whether it could be “trusted as a custodian of the intimate health records of tens of millions of British citizens”.

The Lib Dem MP Luke Taylor, who called the deal “shameful”, said: “Palantir and Peter Thiel must have their hands ripped off of our NHS before it is too late.”

Thiel, a Trump-supporting tech billionaire, founded the company and has previously said that democracy and freedom are incompatible.

In response to the MPs who spoke in a Westminster Hall debate, the government confirmed it would consider whether to continue with the deal when a break clause is due in spring 2027, although £210m of the £330m has already been spent.

In the face of rising pressure from doctors, MPs and the public, Dr Zubir Ahmed, a junior health minister, said: “If at that point in the break clause we evaluate and we find that there are other providers that can do the job better, of course then that needs to be looked at.”

However, he said that the FDP was exceeding its performance targets, adding: “We are no fan of [Palantir’s] politics. However, the FDP and the principles that underpin it are critical to the future of the NHS.”

The debate was led by the Liberal Democrat MP Martin Wrigley, who described the contract as “dreadful”.

“The main issue is trust,” he said. “The future of the NHS depends on intelligent use of data with patients’ trust. Gaining the public’s trust for such research with AI involved is going to be hard enough anyway without a company like Palantir controlling it all.”

The fresh wave of calls for the contract to be axed comes as the health service and Palantir try to fight back and sell the benefits of their contract. NHS England told the Guardian it was focused on tackling “misinformation” while Palantir has been mounting a PR pushback advised by Boris Johnson’s political strategist, Isaac Levido.

The FDP is proving to be one of the most controversial contracts in the UK public sector, and new internal documents obtained by the Guardian under the Freedom of Information Act have revealed health bosses’ internal fears over “negative sentiment” about the system. Emails between officials in January discussed how they needed to “get on the front foot and put out some proactive communications on FDP”.

They show NHS England considered launching a podcast series about the FDP. It was to be hosted by an NHS official who is “pro-FDP” with guests drawn almost entirely from the NHS hierarchy, the plans showed. A separate idea to use LinkedIn to communicate the system’s merits was dismissed, as public comments “could create a more confused narrative, producing negative sentiment”.

The government said on Thursday that 137 NHS trusts had signed up to use the Palantir-powered system. But there are concerns that use is “shallow”. One NHS official told the Guardian that IT experts’ concerns “are not being heard because delivery of the Palantir FDP project has become an ideological one”.

“We’re being forced towards using it reluctantly in many cases,” they said. “The tools are much more difficult to use. They are not industry standard.”

And in another sign of difficulties, the Guardian has learned that training for staff to use the FDP, expected to start in February under a deal with Euan Blair’s tech-focused training company, Multiverse, has yet to begin.

Palantir has countered that its software has helped deliver 110,000 additional operations and reductions in discharge delays. However, the US company’s reputation appears to be a problem. The Guardian previously revealed a briefing note to the health secretary, Wes Streeting, that warned Palantir’s public profile was “likely to make it harder to go further with the FDP”.

Palantir is using social media and broadcast and newspaper interviews to hit back against critics. The killings of US citizens by ICE agents and the destruction of much of Gaza by the Israel Defense Forces has only increased the risk it could lose the most valuable of its more than £500m in contracts with the UK public sector. It is being advised by Fleetwood Strategy, a lobbying consultancy founded by Levido, who helped the Conservatives win the 2019 general election.

In recent weeks Louis Mosley, the UK head of Palantir, has attacked critics who “have chosen ideology over patient safety and patient outcomes”, placed a story with the Sun about a £60,000-a-year internship for school leavers and sponsored a political newsletter widely read in Westminster. Attacks on Palantir have become increasingly shrill. The leader of the Green party, Zack Polanski, said no one should be judged by his grandparents, but added: “This is a man who is the grandson of Oswald Mosley and still insists on wearing a black shirt every single time he is on TV.” Mosley has taken to hitting back on X. A typical post read: “While the noise continues, the software works.”

But MPs like the chair of the commons science and technology committee, Dame Chi Onwurah, have denied that critics are hawking fringe or ideological concerns, citing real anxieties about vendor lock-in, value for money and data security.

An NHS England spokesperson said: “NHS England is focused on working with teams across the NHS to support the rollout of the federated data platform, tackle misinformation and reassure patients that – in addition to their data remaining fully protected at all times – the platform is helping join up care, speed up diagnosis and reduce waiting times. There is no intention to launch a podcast.”

A spokesperson for Palantir said that the software used to process data was “entirely under the control – legally and contractually – of the NHS”.

“The programme is also hitting its milestones – with a green delivery rating – something which fewer than 15% of major government programmes have achieved. It is forecast to deliver a £5 return for every pound spent.”