Britain’s data protection watchdog has said that Google’s privacy rules are illegal and leave internet users in the dark about how their personal details will be used.

Google’s latest guidelines, published last year, are ‘baffling’ and must be overhauled, the Information Commissioner’s Office has ruled.

The online search giant will face ‘formal enforcement’ such as a fine of up to £500,000 or a court order if it does not change its privacy rules by September 20.

The company has already received similar warnings from data protection authorities in France and Spain.

The Information Commissioner’s Office (ICO) said Google’s updated privacy policy raises serious questions about its compliance with the UK Data Protection Act. In particular, it believes that the updated policy does not provide sufficient information to enable UK users of Google’s services to understand how their data will be used across all of the company’s products. The ICO says that Google must now amend their privacy policy to make it more informative for individual service users.

This is not the first time Google has been castigated by the ICO. The company was told just last month to delete snooping data it illegally harvested from British families or face criminal action.

Last year Google sought to make its privacy policies across its various internet interfaces, including YouTube and G-Mail, simpler.

Separate documents on how it would use data collected from each of its websites were condensed into a single file. But the ICO said the details were watered down, and ordinary people would have no idea after reading the file how their personal details, such as email addresses or website viewing history, would be used by Google.

The Data Protection Act, which the ICO says is breached by Google’s current policy, seeks to safeguard the personal information of internet users.

The Act rules that personal information gathered must be stored securely, must not be kept for longer than is necessary, and must not be transferred to an organisation in another country.

Google’s privacy policy states: ‘We collect information to provide better services to all of our users – from figuring out basic stuff like which language you speak, to more complex things like which ads you’ll find most useful or the people who matter most to you online.’

Google says that its privacy policy respects European law and allows the company to create simpler, more effective services. It also says it is fully engaged with the authorities on this issue.

Previously, the company had been branded ‘immoral’ by MPs for avoiding the payment of British taxes and funnelling profits to an offshore tax haven in Bermuda.

Privacy campaigners have also expressed concerns. Big Brother Watch, a privacy campaign group, said that this is the latest confirmation that consumers are being kept in the dark about what data on us Google collects and how that data is used.

A statement issued by Big Brother Watch, said:

… The main issue is that sanctions must be strong enough to make Google take real action, rather than the previous meagre penalties that are seen as a cost of doing business.

… Regulators around the world must ensure that concrete steps are taken to uphold rights and stop Google routinely trampling on our privacy.