No one knows how many marketing lists are circulating in Britain, packed with trivial and not-so-trivial details of our likes, dislikes, income and lifestyle. But the electronic personal information industry is booming - and last year was worth £2 billion. Marketers argue that the mountain of information held on each of us is for our own good. It ensures that we can be targeted with the goods and services we really want.

But consumer and civil rights groups are increasingly worried that it is also being used to discriminate and exclude. And when the information is wrong, it can stop people getting credit cards, services or even jobs.

Concerns about the threat to our identity and privacy from the explosion of the personal information economy are raised in a new book, The Glass Consumer, published this week by the National Consumer Council.

Traditionally, concerns about privacy have concentrated on the intrusions justified as being essential for combating terrorism, crime or anti-social behaviour. The Government wants all drivers to carry a compulsory satellite tracking device in their cars. The European Commission wants mobile phone companies and internet service providers to keep details about every website visited for three years.

Security agencies can track most people to within a few hundred feet of their mobile phones, which work by revealing their locations to the phone networks. If you haven't got a phone, the trail of credit and debit cards will reveal where you've been recently.

But, according to the NCC, the erosion of privacy from the personal information industry is just as concerning. Susanne Lace, author of The Glass Consumer, says most people are unaware how much information is held about them by marketing companies.

"Allusions to Big Brother scrutiny are becoming dated. Instead, we are now moving towards a society of little brothers," she says.

We've got a file on you

Details of every economically active adult in the developing world are thought to be stored on just 700 major databases. You've probably never heard of the company Experian - but they've almost certainly heard about you. The company has details of 45 million people in Britain and is one of the three main credit reference agencies.

Around 16 million of us have filled in one of Experian's detailed lifestyle surveys - its booklets are sent through the post with questions about our income, insurance policies, hobbies, favourite music and reading habits.

The information collected by Experian and the other market research companies from postal surveys is combined with data from credit-card applications, mail-order shopping firms and online surveys to create specialist lists of customers: such as single men aged 35 to 45 who like flashy cars, or women in their sixties with big gardens.

Data also comes from the state. Since 1981, information from the Census has been released to businesses, and has been used to create postcode profiles which are used by at least 500 of the UK's call centres, and which can pinpoint the streets where the richest and poorest people live. Calls to banks and retailers from people living in areas perceived as wealthy are put through immediately to the best-spoken, best-trained and most courteous sales staff. Callers from less affluent postcodes can find themselves pushed to the bottom of the queue, where they wait in automated-voice hell.

Other sources of information are more unexpected. Computers store "cookies", which reveal to any website what you have bought from other online stores. Then there are the supermarket loyalty card schemes, pioneered by Tesco in the 1990s, which record every single item you buy. Thanks to the cards, supermarkets know more about your shopping habits than you do - what days you shop, how swayed you are by advertising and instore promotions and what wine you prefer with chicken.

Big Brother can make big mistakes

If electronic information stored about you is wrong, the consequences can be serious. If your credit rating - determined by one of three credit reference agencies - is inaccurate, you can be turned down for loans, mobile phone accounts or credit cards. It might be wrong because of human or computer error, or because a fraudster has stolen your identity and run up unpaid debts in your name.

In 2003, the Criminal Records Bureau wrongly identified at least 193 job applicants as having criminal records.

Ed Mayo, NCC chief executive, says: "What concerns us is how organisations can use consumers' information and how individuals can keep control of their information. Personal data is collected, stored and manipulated more than ever before and much more than most of us realise. Every time we surf the net or use a credit card, store card or mobile phone, we give away information about ourselves. We are living in a surveillance society, our data protection laws aren't up to the job, and the public seems worryingly unconcerned about the risks.''

Is the Data Protection Act protecting us?

The Data Protection Act is supposed to stop companies holding unfair, inaccurate, excessive and irrelevant information. It gives people the right to release information to individuals on demand and the right to destroy inaccurate or unfair information held about them. Companies can only pass on personal details to others with the consent of the individual.

"Research consistently shows that many companies fail to comply with data protection legislation - often unaware of their legal responsibilities," says Mayo.

But Caroline Roberts of the Direct Marketing Association, which represents 900 companies, says the personal information economy is in the interest of consumers, not just marketers. The DMA runs the Telephone and Mail Preference Services, which allow people to opt out of direct mail and unwanted phone calls from salesmen. About two million people use the mail opt-out, while more than eight million have signed up to stop nuisance phone calls.

"The thing about direct marketing is that it is using data that people have given freely with informed consent," she says. "You wouldn't be on a list unless you'd given consent. From the consumer point of view, it is sinister if they had no knowledge or no means of finding out about the information or no means of getting it removed. Where it's not sinister is when it is giving people choice. There are safeguards and there are ways you can stop it."

david.derbyshire@telegraph.co.uk
How to keep tabs on 'little brother'

Register with the Preference Services

The Telephone Preference Service will stop sales people ringing you at home. Register at www.tpsonline.org.uk or call 0845 070 0707 (020 7291 3320). The Mail Preference Service will stop 95 per cent of junk mail. Register at www.mpsonline.org.uk, call 0845 703 4599 (or 020 7291 3310).

Tick opt-out boxes

Whenever you provide your name, address and other personal information, the data may be passed on to direct marketing lists. Remember to tick the box in the small print asking if you want to opt out of marketing. When you receive an electoral roll form from your local council, tick the option to remove your details from the version sold on to companies.

Use the Data Protection Act

The DPA gives you the right to find out what information is held about you, correct wrong data and ask a company not to pass on information. Write to the organisation you believe holds data. In your letter ask: "Please send me the information which I am entitled to under Section 7(1) of the Data Protection Act 1998." You will usually have to pay a fee of not more than £10.

Check your credit file annually

There are three main credit reference agencies: Equifax (Credit File Advice Centre, PO Box 1140, Bradford, BD1 5US; www.equifax.co.uk); Call Credit (Consumer Services Team, PO Box 491, Leeds, LS3 1WZ; www.callcredit.plc.uk); Experian (Consumer Help Service, PO Box 8000, NG80 7WF; www.uk.experian.com). You should send a fee of £2, your full name and addresses where you have lived over the last six years and any other names you have been known by. Companies also offer an instant online credit check, but that costs more.

Useful contacts

Direct Marketing Association: www.dma.org.uk 020 7291 3300; DMA House, 70 Margaret Street, London, W1W 8SS

Consumers Council: 20 Grosvenor Gardens, London SW1W 0DH, www.ncc.org.uk

The Glass Consumer: Life in a Surveillance Society, edited by Dr Suzanne Lace (the Policy Press, £12.99), is available from the National Consumer Council. See www.glassconsumer.com