The government could "save up to £33 billion a year - the equivalent of £500 for each person in the country – by using public Big Data more effectively", according to free market think tank Policy Exchange.
The Policy Exchange says a specialist "Data Force" unit should be set up in Whitehall to start identifying these savings, which can be made in clamping down in areas like tax evasion and benefit fraud.
The Exchange's report, "The Big Data Opportunity", says the better use of data, technology and analytics could help the government save money by improving efficiency rather than reducing service levels.
It said potential savings made could be between £16 billion and £33 billion a year. The estimate is based on the following potential savings:
£13–22 billion from using data to optimise the day-to-day running of government departments and drive up public sector productivity
£1–3 billion from reducing fraud and error in the benefits system
£2–8 billion from collecting a greater share of unpaid taxes
The Exchange said the Office for National Statistics (ONS) could save £500 million alone by abolishing the census and instead combining existing government data sources to estimate the size of the UK population. A "virtual census", it said, based on the electoral roll, council tax register and other sources, "might deliver acceptable quality and be more up-to-date".
HM Revenue and Customs (HMRC) could also collect more unpaid tax by "accelerating the use of algorithms to mine data" and flag cases that need to be investigated to ensure the correct tax is paid.
Recognising privacy concerns among the public about the security of their data, the Policy Exchange says the government should adopt a "Code for Responsible Analytics", which would "bake in respect for privacy and civil liberties".
Chris Yiu, author of the report, said: "The government will need the capability to conduct analytics effectively, and the courage to pursue this agenda with integrity.
"This is only partly about cutting-edge data science skills. Just as important – if not more so – is ensuring our leaders are literate in the scientific method and confident combining big data with sound judgement."
In the private sector, it was reported last month that senior executives are no longer trusting their business instinct and are instead looking at their Big Data to make major decisions.
Research from the Economist Intelligence Unit (EIU) indicated that the use of Big Data had improved businesses' performance, on average by 26 percent, and that the impact will grow to 41 percent over the next three years.