Not quite right. This is defense in depth. The judicial system is supposed to prevent abuses like this, but just in case, you also limit the ability of the government to track you.
> Confidential data can have better security checks and encryption layers so it is accessible only by the citizen itself or whoever the citizen grants access to
The countries that these discussions are about (the UK and RU, with the subtext of the US) have not demonstrated that their legislators are trustworthy enough to implement digital ID in a privacy-preserving. Unless and until that happens, then discussion of it is off the table. When you advocate for a thing being implemented, you are implicitly advocating for its current real-world implementations.
My point was the government can still totally track you as an individual, the data is just fragmented all over the place. But if you are high profile the government can totally put some investigator to track down everything.