MPs have called on the government to speed up its efforts to promote data sharing between government departments and local authorities to boost the uptake of council tax benefit.

The Commons Public Administration Committee made the call after its inquiry into council tax benefit, which has the lowest uptake of any means-tested benefit. Only between 62% and 68% of those eligible claim their entitlement.

In its report on the inquiry, the committee cites evidence from Warwick University senior research fellow Sir Michael Orton, who told the MPs that pensioners – a key target group – could be more effectively encouraged to claim their entitlement if the Pension Service could automatically send information on potential claimants to the relevant local authority.

Local councils, which administer the benefit, could then use the information to tell potential claimants how much benefit they could receive.

The New Policy Institute think tank told the MPs that greater data sharing would also help benefit take-up by non-pensioner households.

Ministers should also investigate the feasibility of introducing automatic council tax benefit assessment and billing, the MPs said.

“We recommend that the government accelerate efforts to promote inter-agency data-sharing, particularly between the Pension Service, HMRC and local authorities, as a means of increasing council tax benefit take up,” the report says.

he MPs acknowledged concerns over privacy, but noted witnesses’ evidence that the public may not share data protection fears. The charity Help the Aged told MPs that many elderly people thought government agencies already shared their data.

The committee called for research to support increased data sharing, which “should include an examination of the impact of data protection legislation on the potential for greater data sharing and options for maintaining privacy for individuals who do not agree to their data being shared”.

Committee chair Phyllis Starkey MP said: “We call on the government to do more to increase the take-up rate, not just for pensioners, but for all. The government should accelerate efforts on data sharing and its research into automatic assessment and billing of council tax benefit.”

The MPs’ call will stoke the growing debate about data sharing by government – and privacy concerns.

Ministers have already announced the extension of a pilot scheme to share personal data between the Department of Work and Pensions, HMRC and local authorities.

And former prime minister Tony Blair proposed a relaxation of the data protection laws to allow greater data sharing – a move he said would improve public services by reducing the amount of form-filling for individuals.

But although his successor Gordon Brown included measures to share more data in three proposed government bills, none is focused on welfare or improving public services. Instead, Brown’s draft legislative programme includes new data sharing powers in proposed laws on terrorism, education and skills and the sale of student loans.

Separate moves to give the police access to data on millions of individuals’ car journeys gathered by congestion charging cameras have revealed deep divisions between ministers on how far data sharing should go.

The Liberal Democrats have called for a “full debate” on the way the government uses its huge databases.