Watchdog warning on benefits snooping

Christopher Graham wants to discuss the proposals with the Department for Work and Pensions (DWP) amid concerns over state snooping and the misuse of personal data.

It comes after David Cameron announced that private firms could be brought in to help in an "uncompromising crackdown" on benefit cheats in the autumn.

The Prime Minister said reducing the 5.2bn annual cost of fraud and error would be the "first and deepest" cut in public spending and that credit rating agencies could be recruited to help identify false claims.

And he insisted people should not be concerned, saying: "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's taxpayers' money. People going out to work hard every day do not pay their taxes so that someone can basically claim it fraudulently."

While suggesting it was fine to use credit rating agencies to establish someone's identity, Mr Graham told BBC2's Newsnight: "If it goes beyond that and it starts being really intrusive and asking questions about people's spending habits rather than just whether they are who they say they are then that's something that's got to be explored with the Information Commissioner, because I've got responsibilities under the Data Protection Act and I'm not convinced from what I've heard - if this is an extension of what's already happening - that there aren't issues here that we need to explore.

Campaigners have warned of other potential consequences of the proposed system.

Shami Chakrabarti, director of pressure group Liberty, said: "What we must not do is to create the benefit equivalent of parking attendants who are wanting to find people guilty, wanting to find people suspicious, because that's the way they get paid."

But a DWP spokeswoman said the department was already working with third parties to help fight benefit cheats.

"The Prime Minister and Iain Duncan Smith have both made clear their determination to reduce the amount of fraud within the system," she said.