A huge increase in data sharing between UK government agencies is a key plank of an immigration rules enforcement strategy published by home secretary John Reid.

Earlier this year, prime minister Tony Blair sparked widespread criticism when he proposed greater sharing of individuals’ personal data by public sector bodies – a move that is expected to require changes to data protection legislation.

Blair said increased data sharing would improve public services and reduce form filling, but opposition parties and privacy campaigners attacked the plans, while the Information Commissioner's Office urged “a cautious approach” to avoid “the dangers of excessive surveillance and the loss of public trust and confidence”.

But the immigration rules enforcement strategy has put large-scale data sharing back on the agenda. It says the Home Office will “systematically review the effectiveness of our data sharing powers and arrangements with all key partners, and where there are deficiencies, we will resolve them”.

The Home Office wants to allow a “watch list” of illegal immigrants to be matched against bulk datasets such as those held by HM Revenue and Customs, the Department for Work and Pensions and local authorities.

The strategy also proposes a new Home Office function to be set up each region to “collect, analyse and disseminate” information and “link this into” other public sector organisations with large scale databases. A dedicated data quality function will also be set up, beginning this month.

The documents cites the example of new measures contained in the UK Borders Bill, currently before parliament, that will create a new data sharing “gateway” between the Home Office and Revenue and Customs, allowing lists of individuals who have overstayed their visas to be matched against national insurance data.

The strategy also announces a review of how the driver licensing system could be used to “identify and combat” illegal immigration” and proposes that the NHS and local authorities should have access to data in order to limit access to services or prevent council tax fraud.

A spokesperson for the Information Commissioner’s Office (ICO) said: “The ICO recognises that dealing with illegal immigration may be assisted by the wider sharing of some personal information held by government.”

The Data Protection Act did not “stand in the way of appropriate information sharing between government departments”, she said, adding: “We are currently studying the details of the strategy and we will work with the Home Office on the practical consequences of the information sharing proposals for data protection compliance.”