Almost 5,000 public servants may have been given pay-offs involving gagging orders when they left their posts, figures have revealed.
Some 200 staff in Whitehall and 4,562 in local authorities have signed "compromise agreements", many of which involved confidentiality clauses, The Daily Telegraph reported.
Communities and Local Government Secretary Eric Pickles warned councils against using "under-the-counter pay-offs to silence departing staff".
He said: "For too long, local government has made departing staff sign gagging orders, often with big pay-offs attached, away from the eyes of those who get left with the bill: the taxpayer.
"When leaving a job councils and their employees need to part ways fairly. Giving out thousands in under-the-counter pay-offs to silence departing staff is not the way to achieve this.
"Councils have a responsibility to the public and transparency is at the heart of that. By shining a light on these activities and introducing new democratic checks and balances to stop gagging orders being abused we are helping councils improve accountability in local government."
Last month Health Secretary Jeremy Hunt banned the use of gagging orders which prevented NHS staff raising concerns about patient care in the wake of the Mid Staffordshire scandal.
According to The Daily Telegraph's figures, the use of compromise agreements is widespread across town halls and Whitehall.
A Freedom of Information survey found that 256 councils in Britain signed compromise agreements with former staff between 2005 and 2010.
The number of confidentially agreements issued by councils soared from 179 in 2005 to 1,027 in 2010. Brighton & Hove City Council has signed the most, with 123 agreements with former staff.
In central Government, the Department for Business, Innovation and Skills has signed the agreements with 83 officials over the past two years, at a cost of £2.6 million.
The Treasury has signed agreements with 64 individuals at a cost of £2.5 million, although only a "small number" involved confidentiality agreements.
The Department for Transport signed 40 agreements in the past three years, all of which contain confidentiality clauses.
The Department for Energy and Climate Change signed 12 agreements containing confidentiality clauses at a total cost of £1.5 million, the Ministry of Justice signed 15 at a cost of £250,000, while the Foreign Office spent £5.5 million on compensation agreements.