The Commons Justice Committee of MPs says new criminal laws should be put in place to punish reckless or repeated data breaches.
At the moment, government departments cannot be held criminally responsible for data-protection breaches.
It is government departments that have been at the centre of the most recent major data breaches, including the loss of personal details of 25 million people by HM Revenue & Customs.
The committee said there was a "widespread problem" and "systemic failings" in the government's handling of personal data.
Liberal Democrat Justice Committee chairman, Alan Beith, told the BBC, "The scale of the data loss by government bodies and contractors is truly shocking, but the evidence we have points to further hidden problems."
He said, "It is frankly incredible that the measures HMRC has now put in place were not already standard procedure."
The government is currently considering proposals to amend section 60 of the Data Protection Act through the Criminal Justice and Immigration Bill, to help tighten up the security of personal data.
The Justice Committee is demanding stronger enforcement powers and greater resources for the UK Information Commissioner.
It also wants a legal obligation to report significant data losses to those affected, as well as to the Information Commissioner.