OTTAWA (Reuters) - Government budget cuts could threaten the privacy of personal and business information as Canada's statistics agency abandons its standalone computer system and finds cheaper ways to obtain its data.
Canada's privacy watchdog, who famously challenged policies at Facebook (FB.O) and Google (GOOG.O), and chief statistician Wayne Smith both see risks in Statistics Canada cost-cutting measures, part of a broad effort to eliminate the Canadian federal budget deficit by 2016.
As well as cutting staff and eliminating some of its surveys, Statscan must merge email and data systems with those used by 42 other government departments and agencies and likely rely more heavily on outside sources of data.
"We have underlined the fact that consolidating the email functions of so many federal organizations into one service could result in greater vulnerability for personal information," said Scott Hutchinson, a spokesman for the Office of the Privacy Commissioner of Canada.
Statscan, which must cut spending by C$33.9 million ($33.33 million) by 2015, has traditionally kept its computer systems separate from external ones to ensure the confidentiality of all the sensitive information it manages, as is required by law.
That enables it to protect personal data such as names, addresses, employment and financial assets as well as sales and production data obtained through some 350 surveys.
Chief statistician Wayne Smith said in his annual report that his agency "faces significant new challenges in delivering its program and protecting respondent confidentiality" once it joins a program called Shared Services Canada (SSC), created last August to unify information technology across the federal bureaucracy to cut waste and replication.
Alice Nakamura, a University of Alberta economist who follows Statscan issues closely, worries the changes are being rushed through without a proper risk analysis.
Other experts - pointing to cyber attacks at several government departments last year - fear hackers could access private information more easily if it is stored on a new system.
"It is worse than senseless to force Statscan to make changes in their communications and data systems at this time," said Nakamura.
"Those systems are the core of their operations. The agency was already pressed for time and human resources to figure out how to remake their data production operations because of the unprecedented budget cuts."
SSC said government bureaucracies will continue to manage their own data, but it will operate the hardware. It promised to work with Statscan to ensure a smooth transition and said government security and privacy policies won't change.
"SSC takes very seriously the responsibility to protect privacy and security in accordance with relevant legislation and policies," said spokesman Ted Francis.
The other concern at Statscan centers on the possible increased reliance on data from third parties rather than through costly Statscan surveys.
The agency already obtains records from outside bodies such as police and tax authorities for some statistics like homicide rates and payrolls, to name a couple. Smith said the best way to save money while ensuring data quality was to expand the number of these partnerships for obtaining what is known as "administrative data".
But he added: "There are risks associated with balancing greater use of administrative data with Canadians' privacy concerns about this practice."
Privacy commissioner Jennifer Stoddart has advised Statscan in the past on protecting confidential information, and she urged Statscan to work closely with other organizations if it uses this method more.
Canadians should be told their information will be used for statistical purposes, and should be able to access and correct that information, she said.
Stoddart earned a global reputation in 2008 with the world's first investigation of privacy practices at social media site Facebook. Facebook responded with steps to limit sharing of personal information with third-party applications and to tell users more about privacy settings.
She later locked horns with Google Inc (GOOG.O) for collecting personal information as it photographed Canadian streets for its Street View projects.
Editing by Janet Guttsman and Jeffrey Hodgson