Jeremy Watson - Every click of a mouse, every swipe of a card… your habits are being watched, recorded and sold to all and sundry

APPROACHING a certain age, I must at some stage have logged on to certain websites, looking for financial or other advantages of entering my sixth decade. Having found there were very few I logged off.

Ever since, I have been bombarded through the post and through my screen with services for the over-50s. One company, obviously realising I am less likely to crash my car or burn down my house, is offering me cheap insurance. "Mr Watson," said its literature, "this is just the deal you are looking for."

On the internet, e-mails are pouring in from something called the 'Over-50s Housing News', which wants me to attend a seminar on retirement accommodation. I am expecting a call from Saga Holidays and Viagra salesmen any time now.

Someone out there is clearly watching me. And I am not alone in my concerns that the surveillance society is gradually but inexorably getting out of hand. Earlier this year, the British inventor of the internet, Sir Tim Berners-Lee, was moved to warn of the dangers of web-based tracking systems that will help advertisers target the public, claiming they will be open to abuse.

He was specifically alarmed about medical knowledge leaking out to insurers, saying he didn't want to consult a website about lung cancer and then find his medical insurance premium had soared in price. Sir Tim made his comments as a company called Phorm tied up a deal with three of the UK's biggest internet service providers (ISPs) – BT, Virgin Media and TalkTalk – which, between them, have more than 10 million customers.

Phorm tells advertisers that it will be able to profile the surfers, based on where they have visited, and target them through a unique piece of computer code called a 'cookie'. But users are told they will not be identifiable. Many observers are both sceptical and spooked.

"It makes it quite scary to log on to anything now," said Simon Richards, director of the Freedom Association. "One false click and you can be bombarded with information you never wanted." But he and other privacy campaigners acknowledge that Big Brother's reach is now far more extensive than your home computer.

So who is gathering all this information and how are they are doing it? Perhaps more importantly, to what purpose is it being put and is it too late for the Government to stop the information-gathering in its tracks?

"I think in some cases, it is too late," Richards said. "It has become part of our lives whether we like it or not. But that doesn't mean we should stop trying to make sure all that information that is out there about us is not put to misuse."

The concerns are official. Last Friday, the Government's own review of the spreading use of personal information, commissioned by Prime Minister Gordon Brown, recommended that ministers should launch an inquiry into firms which gather information and then pass, or sell, it on.

The report by the English Information Commissioner, Richard Thomas, and the director of the Wellcome Trust, Dr Mark Walport, said the public should have a right to know with whom a company shares, exchanges or sells information. "Opt outs" on the internet should be made clearer, it added, and such moves would make it far easier for the public to control who knows what, and limit the availability of contact details used by cold-callers and junk and spam mailers.

It is the thought of an anonymous third party monitoring data supplied through ISPs that alarms many computer users. ISPs are themselves unsure how customers will react to companies such as Phorm. TalkTalk says its customers would have to opt in for their information to be used. BT and Virgin are considering asking their customers to opt in or opt out.

However, shoppers are already being tracked on what some consider to be a worrying scale. Data on the purchasing habits of tens of millions of customers are recorded every time they use a store loyalty card. Tens of millions more credit and debit card purchases are equally monitored, stored and ultimately put to use for other people's financial gain.

You are far from safe in your own home. Head online to browse and you are instantly inputting details about your tastes in reading, music, food, drink, fashion and much more. Quotes for insurance or utilities involve detailed questionnaires which steal information on your identity as you type. Your age, gender and social class become obvious.

An investigation by the Which? consumer magazine found that personal information on UK citizens is now stored on at least 700 databases. It's not there for your protection. Store cards and online shopping databases are a gold mine for private companies who want to get their goods in front of those who might appreciate them most. One company which most consumers have never heard of, Dunnhumby, operates the Tesco clubcard and holds detailed data on the buying habits of 13 million Britons. Another card, Nectar, issued by Ford, BP and Sainsbury's, is used by 10 million more. More than 15 million regularly use the Boots Advantage Card.

Here lies the twist. The Data Protection Act states that information can only be used for the purpose it was collected for – buying patterns – and must then be deleted. But most consumers sign away some of their rights when taking out a card. Big money is then made from compiling detailed profiles of customers and selling them on to affiliated companies. The turnover of Dunnhumby alone was £77m last year.

The companies involved insist they are handling anonymous data, but campaigners are sceptical. John Scott, the Glasgow-based civil rights lawyer, said: "An identikit of us can be put together without too much difficulty from information from these different sources. While advertisers may have relatively benign intentions towards us, that may not always be the case. Depending on the sensitivity of the information, there is scope for misuse. ISPs are not that fussy about sharing information and the further it spreads the more likely it will be misused."

The trade in data is secretive, but some idea of the profits to be generated comes from the Royal Mail. Selling off information involving 27 million addresses and thousands of post codes to marketing organisations yields annual profits of around £1.6m. Brian Baglow, an internet marketing expert, says companies exist to gather information packages through online and direct mail competitions and surveys and then sell the data on.

"These information packages about your preferences and your lifestyle are very valuable commodities. How valuable depends on the quality of the information to buyers who want to target certain demographics."

There are techniques, however, that can prevent the giving away of information you do not want to disclose. Baglow recommends installing computer software – much of it free – that prevents pop-ups or rogue e-mails from direct marketing organisations.

When ordering goods or completing questionnaires, be wary, says Baglow, of the small tick boxes that ask whether you mind your information being shared with interested third parties. "Some say 'click here if you don't mind', some say 'click here if you do mind', so make sure you understand what you are doing. Otherwise don't be surprised if you are communicated by someone from Azerbaijan wanting to sell you a stairlift."

For the Freedom Association, the biggest threat to privacy from the unfettered flow of personal information comes not from retailers but from central and local Government. "Information is power and money, but no-one is forcing you to take a store card," said Richards. "What is far more sinister is the use that the authorities can put all this information to."

Local councils were criticised earlier this year by the Local Government Association for using new anti-terror laws to spy on residents. The laws, passed under the Regulation of Investigatory Powers Act (Ripa) last October, were intended to protect against a serious terrorist attack. But, unknown to most of the public, they also give more than 600 public sector bodies the right to demand itemised phone bills and carry out surveillance to investigate all kinds of offences.

In the coming era of local authority 'green police', failing to recycle your rubbish could put you under surveillance. If the UK implements the full directive on which Ripa is based, then the powers could be extended to browsing patterns on the internet and e-mail accounts. And it is not as if the march of technology is going to stop any time soon. A national identity card, carrying as yet undecided sets of data, is still on the Government's agenda.

Google hopes its new StreetView service, launched to a storm of protest in the US already and heading across the Atlantic soon, will be both popular among users and a money spinner for the company. Users will be able to log on to views from any street in the world and pan around to observe individual homes. Some see it as a tool for housebuyers, others as a thieves' charter (see below].

One major concern is that the regulatory bodies set up by the Government, such as the Information Commission, do not have enough financial muscle or staff to keep pace with new developments. In London, the Justice Ministry conceded last week that there was a clear need for new measures to increase public trust and confidence in the handling, processing and sharing of personal data. The powers of the commissioner are to beefed up and funding increased to support any new powers.

Scott believes more resources are crucial. "Every bit of technology we use now has the potential to leave our digital or electronic fingerprint somewhere. Without the right level of resources the Information Commissioner won't be able to keep track of what is happening today, let alone tomorrow. "