The Information Commissioner has asked coalition ministers to explain their plans to use credit reference agencies to gather evidence of benefit fraud, citing privacy concerns.
Christopher Graham today said he has requested a meeting with the welfare minister Lord Freud.
It follows David Cameron's announcement yesterday of a new initiative to offer credit reference firms such as Experian a "bounty" for detecting benefit cheats. The firm is in talks to combine its data with that of the Department for Work and Pensions to look for signs of undeclared income.
The government estimates fraudsters claim £1.5bn every year.
But the Information Commissioner urged caution. "I hope the Government is going to hold to the good practice of considering the data protection implications of policies at the earliest stage," he said.
"A common sense approach should be applied to information sharing. This includes letting people know how their information will be processed. Most organisations make it clear that should they need to they will share details with authorities for the prevention and detection of crime."
The government already uses credit reference agencies to detect some tax fraud, but Cameron's proposals would radically extend the practice into the welfare system.
"Private companies use all sorts of different means to make sure they are not defrauded, why should the state be any different? In the end it is taxpayers' money," the Prime Minister said.
Graham indicated that he believes it is proportionate to share credit reference data where fraud is suspected. "It is reasonable to expect that if you are committing benefit fraud your details will be shared with the appropriate authorities dealing with this," he said.
His comments seem to echo those of civil liberties groups, however, who warned against government "fishing expeditions".
"Nobody approves of benefit cheats but mining private data on a routine basis on the off-chance of catching people out is a disproportionate invasion of privacy," said Alex Deane of Big Brother Watch.
The idea of incentivising the private sector to catch cheats has also come under fire. Liberty director Shami Chakrabarti said: "What we must not do is create a benefit equivalent of parking attendants who are wanting to find people guilty, wanting to find people suspicious because that is the way they get paid." ®