Labour wants new powers for police and security services to crackdown on cyber crimes like child pornography and terrorism but only with extra checks on how crime agencies are using sensitive data, the shadow home secretary will say.
Technological developments have sparked a wave of new types of crime and a 30% hike in recorded online fraud is just the "tip of the iceberg", Yvette Cooper will warn.
But fears about abuse of information in the wake of leaks by ex-US security contractor Edward Snowden, which revealed widespread spying by government listening post GCHQ, means new safeguards are needed to protect privacy.
Controversial plans by Home Secretary Theresa May to enable the police and security services to track emails and other online communications under a "snooper's charter" were blocked by the Liberal Democrats.
Ms Cooper will warn the Government it must not "bury its head in the sand" as she calls for reforms to keep up with the ever-changing cyber world.
Much stricter controls over access to private data must be introduced to give the public confidence amid fears about the way information can currently be accessed and used, she will say.
In a speech in central London to the Demos think tank, Ms Cooper will call for a new national strategy for tackling online fraud, tougher action to tackle online child pornography and an overhaul of parliament's Intelligence and Security Committee, which keeps a check on the work of the intelligence agencies.
She is expected to say: "In the face of growing online crime and abuse, and the use of online communications by criminals and extremists, the police, intelligence and security agencies need to be able to operate more effectively in this digital world. But for them to do so, we also need stronger safeguards and limits to protect our privacy and sustain confidence in their vital work.
"The oversight and legal frameworks are now out of date. That means we need major reforms to oversight and a thorough review of the legal framework to keep up with changing technology. And there are difficult wider challenges about privacy, data and the private sector, and how we protect British citizens' interests in a global internet where everyone follows different rules.
"Above all we need the Government to engage in a serious public debate about these new challenges and the reforms that are needed. Online communication and technology is forcing us to think again about our traditional frameworks for balancing privacy and safety, liberty and security. The Government can't keep burying its head in the sand and hoping these issues will go away - they are too important for that, for our liberty, our security, the growth of our economy and the health of our democracy."
She will add: "Perhaps most serious of all has been the growth in online child abuse. Last year the Child Exploitation and Online Protection Agency received 18,887 reports of child abuse - an increase of 14% on the year.
"The police and security services have been under pressure to explain why they didn't know more about the murderers of Drummer Lee Rigby, and why more is not being done to disrupt the use of the internet by violent extremists looking to radicalise young people.
"At the same time the new NHS database has just stalled due to public and GP anxiety about the privacy safeguards. And last summer Theresa May's Communications Data Bill finally ran into the ground after it lost the confidence of the all-party Joint Committee set up to scrutinise it.
"And - with perhaps the widest ramifications of all - former NSA contractor Edward Snowden leaked hundreds of thousands of US intelligence documents and 58,000 British intelligence documents - raising serious concern about the impact on national security and about the scale of activity of intelligence agencies all at the same time.
"These issues - online crime, private sector data storage, intelligence operations -are often treated as separate. Yet all raise the same fundamental questions about how we sustain both liberty and security in a digital age."