Town halls should be banned from selling edited versions of the electoral roll to private companies under proposals published today by the information watchdog.

Companies would no longer be able to use the edited register to send unsolicited mail to members of the public.

The proposal forms part of an official review, commissioned by the Prime Minister last year, which also recommends a clampdown on junk mail, cold calling and spam e-mails.

It also said it should be easier for the public to keep track of who holds personal information about them.

Richard Thomas, the Information Commissioner and Dr Mark Walport, director of the Wellcome Trust, said ministers should begin an inquiry into firms which gather personal information and then sell it on.

Mr Thomas admitted that banning councils from selling edited versions of the electoral roll would amount to a return to the pre-internet era with copies only available in public libraries.

He said: “We feel that selling the edited register is an unsatisfactory way for local authorities to treat personal information,” the report said.

“It sends a particularly poor message to the public that personal information collected for something as vital as participation in the democratic process can be sold to ’anyone for any purpose’.”

The report 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.

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 mailers.

The Information Commissioner should also be given the power to impose big fines against companies or government agencies which deliberately or recklessly breach privacy rules.

The 75 page Data sharing review report called for fines similar to those which can be imposed by the Financial Services Authority, which can run into millions.

Internet sites which gather publicly-available details about individuals from electoral rolls, company registers, telephone directories and websites presented a “worrying threat to privacy”, the report said.

It added that the Government should review the operation of these services and consider regulating them.

Mr Thomas said the amount of personal information on social networking sites such as Facebook and Bebo was still a problem.

He was working with companies to seek improvements but there was still a lot to be done, he added.

Dr Walport said: “Many individuals are posting more and more personal information on the web and of course web technology means that it can be aggregated in a very powerful way.”

The report also recommended an immediate review of the “often misunderstood” Data Protection Act and organisations should draw up privacy policies setting out what personal information they hold, how they use it and who can access it.

It reiterated the Information Commissioners long-standing demand that he be given new powers to gain in entry to premises to inspect their privacy and data-handling measures, using a court order and the use of force if necessary.

Mr Thomas said: “There is undoubtedly a lot of confusion and uncertainty, particularly about the law.

“People can sometimes hide behind the law and there is a significant lack of public trust in data-sharing. If there is to be sharing it’s got to be absolutely crystal clear who is responsible for getting it right.”

Many organisations simply collect too much data, the authors added. “When you check into a hotel they don’t need to know your name and address, they just need to know that the bill will be paid,” Dr Walport said.

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