The current review of data sharing will consider changes to the 1998 Data Protection Act and new legal sanctions, the government has confirmed.

Prime minister Gordon Brown ordered the review last month in a speech on civil liberties in which he acknowledged the continuing controversy over the government’s ID cards scheme and the handling of personal data.

Increased government data sharing powers are also included in new laws outlined in the queen’s speech, and ministers have repeatedly cited greater data sharing by public sector agencies as a way of improving public services.

But the loss of loss of 25 million people's records on two CDs in transit between HM Revenue and Customs and the National Audit Office has enormously increased the level of public concern about how and why individuals' personal data is shared.

The Ministry of Justice has now confirmed that the review to be carried out by information commissioner Richard Thomas and Mark Walport, director of medical research charity the Wellcome Trust - will consider whether there should be changes to the way the Data Protection Act works.

It will also make recommendations on the powers and sanctions available both to the Information Commissioner’s Office and the courts in the various pieces of legislation that govern information sharing and data protection. The review team will look at how data sharing policy can be developed to ensure transparency, scrutiny and accountability, the ministry said.

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The European Commission – which has been embroiled in rows with the US over its requests for data on EU citizens – will be consulted as part of the review, along with the IT community, academics, public sector agencies and private firms.

A report on the review will be published by justice secretary Jack Straw in the first half of 2008.