More than £3.9 million has been spent by public bodies in the last two years on paying private investigators for surveillance work - including snooping on their own staff.
The Department for Transport (DfT) is among a range of public organisations that have paid private firms to spy on their behalf, while it has been claimed some 14 bodies, including 10 councils, may have commissioned potentially illegal surveillance.
The findings, obtained under the Freedom of Information Act by civil liberties and privacy campaigners Big Brother Watch (BBW), revealed that four organisations paid other public bodies to undertake surveillance and four councils used private investigators to spy on their own employees.
BBW director Nick Pickles said the revelations prove that surveillance laws are "not fit for purpose". He said: "The Government has acted to control surveillance by local councils but this research shows more than ever before public bodies are using private detectives to do their snooping. The law is at breaking point and public bodies shouldn't be able to dodge the legal checks on them by using private investigators."
A total of 29 organisations - 27 councils, one public authority and one government department, the DfT - paid private firms to undertake surveillance using powers under Regulation of Investigatory Powers Act (Ripa) in the years 2010/11 and 2011/12.
But some 1 4 organisations - 10 councils and four public authorities - paid private firms to undertake surveillance that was not covered by Ripa - meaning they commissioned potentially illegal activity. Two public authorities and two councils paid other public bodies to spy on their behalf at a cost of £7,600, while four councils - Caerphilly, Dudley, Leicestershire and York - used private investigators to monitor their own staff.
Mr Pickles went on: "This research has uncovered cases where it looks like the law has not been followed and it's essential they are urgently investigated. Unlike the US, British law isn't strong enough to stop evidence obtained by illegal surveillance being used in court and the punishments for people deliberately flouting the law are trivial."
BBW has recommended urgent reform of Ripa to protect against unauthorised surveillance by third parties, The Police and Criminal Evidence Act 1984 should be strengthened to stop unauthorised surveillance by raising the bar about what evidence can be used in legal proceedings, BBW recommended.
Communities secretary Eric Pickles said: "This Government has clamped down on the overuse and abuse of surveillance powers by town halls. Such powers can only be used for serious crimes, and require a magistrates' warrant. It is totally unacceptable if councils are trying to sidestep these important new checks and they should be held to account for acting outside the law."
A Department for Transport spokeswoman said: "The Department and its executive agencies take potential fraud very seriously and it is sometimes necessary to involve a third party to investigate such claims in order to protect taxpayers' money. For example, on occasions the Highways Agency and the Driving Standards Agency have commissioned private investigators in cases of driving test fraud and potentially fraudulent personal injury claims."