Ministers are to announce next month that they have overturned a key data protection principle which prevents information on individual citizens held by one government department from being passed to another public agency, the Guardian has learned.
It is believed that a cabinet committee, MISC 31, set up by Tony Blair to examine data sharing and chaired by Hilary Armstrong, chancellor of the Duchy of Lancaster, decided last month to overturn the principle that personal information provided to a government department for one purpose should in general not be used for another.
Instead ministers are expected to announce that the new policy on personal data sharing will say that "information will normally be shared in the public sector, provided it is in the public interest".
The current policy means that public bodies and departments must provide a legal justification each time they want to share data about individuals and specify the purpose. The new policy will reverse this and allow officials to assume that personal data can be shared unless there are pressing reasons not to disclose it.
The policy has been developed by John Suffolk, the newly appointed government chief information officer, with the job of leading the drive to transform public services using technology, including the development of shared services.
Mr Suffolk has denied there will be free trade across Whitehall in personal information: "Not all information will be shared," he said. "This is not about sharing your health record or criminal record. It is about basic data sharing to ensure that services to citizens are seamless."
It is expected that the change of policy on data sharing will be presented as a consumer-friendly move. Officials say that when a family move home, they could register their new address online with their local authority, which would then update the records of the new local authority and pass the information to the driving licence authorities, the tax authorities and the electoral registrar.
They also claim it would prove helpful in resettlement work when an offender leaves prison: the probation service, social services and the employment service could all be notified in advance of the release date.
But privacy campaigners see the move as a threat to civil liberty. Simon Davies, of Privacy International, said widespread data sharing would enable different arms of the state to operate as one body, collecting fines and taxes on behalf of another agency.
Critics claim that an unpaid parking ticket for someone on benefits could lead to that information being passed to the Benefits Agency and the fine deducted directly.
The change will have implications for the compliance of public bodies with the data protection legislation. The key data protection principle says "personal data shall be obtained only for one or more specified and lawful purposes, and shall not be further processed in any manner incompatible with that purpose".