Electronic Communications Bill

HL Deb 22 February 2000 vol 610 cc185-224

6.25 p.m.

The Minister for Science, Department of Trade and Industry (Lord Sainsbury of Turville)

My Lords, I beg to move that this Bill be now read a second time.

I am delighted to introduce this important Bill. The Electronic Communications Bill will help achieve the Government's target for making the UK the best place in the world for e-commerce by putting in place the right legal framework. Just as Britain led the world in the first industrial revolution, so the Government are determined that Britain will be among the winners in the knowledge economy.

Our strategy for achieving this ambitious target is clear. We need modern, competitive markets that will enable the fast growth of electronic commerce, confident consumers with the skills and access to exploit the potential of the Internet and a government committed to exploiting the full potential of the new technologies to transform and improve the ways in which we deliver services to citizens and citizens communicate with the Government.

The Bill will help to create the right market framework. It will lay sound foundations for Britain to become a dynamic, knowledge-based economy by promoting electronic commerce and electronic governance. Bill Gates has described the Bill as "the model for Europe". The CBI said today: The CBI would now like to see the Bill pass to the statute book as speedily as possible, and we welcome and support the Government's commitment to try and enact this Bill by April". Through the Bill, we plan to be one of the first countries to implement the EU Electronic Signatures Directive, so that British firms can benefit from the emerging on-line single market. The UK is rightly being seen as Europe's e-commerce hub; not least because of the co-regulatory approach we are adopting with industry—an example being the innovative T Scheme to provide trust services to business and the public. I will say more about the T Scheme later in my speech.

The Bill will build trust in the authenticity, confidentiality and security of on-line transactions. It would confirm the legal admissibility of electronic signatures. Furthermore, it will enable us to modernise the statute book by allowing the Government to amend references to paper signatures, documents, records and formalities such as sealing or witnessing to include electronic equivalents.

The Bill is the result of an extensive process of consultation with business and the IT industry and the Government have made extensive changes to the policy inherited from the previous administration. This process of consultation has resulted in a genuine partnership in this area between government and industry. Indeed, as I shall explain, the Government hope to see many of the Bill's objectives achieved by self-regulation to the extent that we hope that we shall not need to bring Part I into force.

The first aim of the Electronic Communications Bill is to build trust among consumers and business in the providers of cryptography services. There is widespread agreement of the need for a kitemark so that consumers and businesses can have trust in the providers of those services. Such services allow users to verify who has sent an e-mail, to have confidence that their messages will not be altered en route and to have confidence that their commercial information or credit card details will be kept secret.

Part I provides statutory back-up to a voluntary, self-regulatory scheme of trust service providers. The Government are working with the Alliance for Electronic Business, which is drawing up a self-regulatory approvals scheme, known as the T Scheme, to ensure minimum standards of quality and service.

When the Government consulted on the draft Bill in July 1999, we spelt out the criteria which we believe such a scheme should meet. Those include the need for a broad coverage of industry sectors and range of services, consumer representation, clear standards, the ability to ensure compliance and the ability to meet EU standards so that British businesses and consumers can take advantage of the single market.

The Government's strong preference is for self-regulation, with the statutory powers in Part I held in reserve in case self-regulation fails. The Government are confident that if the Alliance for Electronic Business delivers what it currently plans to deliver, we shall not need to brine Part I into force.

We believe that self-regulation will work. However, this is an extraordinarily fast-moving area, and the T Scheme is not yet operational. It would be thoroughly irresponsible to abandon now the possibility that we shall need a statutory scheme in future. Instead, the sensible course is to work with industry on self-regulation, while creating a statutory default option. After Royal Assent we would hold Part I in reserve in case self-regulation fails. We would then conduct an open review in 2004 of how self-regulation was working. Provided it was working well, these powers would lapse within five years under the sunset clause—Clause 15.

In view of our preference for self-regulation, the Delegated Powers and Deregulation Committee has suggested that the House might consider amending the Bill to make the commencement of this part subject to the affirmative procedure. Having considered carefully the committee's views in this area, the Government have reflected on their position and I shall table amendments to meet that recommendation.

Part II of the Bill confirms the legal admissibility of electronic signatures. It would give Ministers the powers to update the statute book by providing electronic equivalents to paper signatures, records and documents. Lawyers argue about whether or not electronic signatures would be recognised as valid by the courts. We cannot afford to wait while lawyers argue and courts decide. Instead, Clause 7 will allow business and consumers to have confidence in electronic signatures. It puts beyond doubt that a court can admit evidence of an electronic signature and a certificate in support of a signature, not only for the purpose of establishing who the communication came from, but also in establishing the date and time it was sent and in some cases whether it was intended to have legal effect.

These measures have been widely welcomed by industry. For example, Intel said that it was, delighted that government … is focusing on the real issue of legal recognition of electronic signatures which will give a vital boost to business and consumer confidence". John Browning, co-founder of First Tuesday, Europe's leading meeting place for people, money and ideas in new media and e-commerce, said: Creating a regulatory environment that makes the electronic realm at least as consistent, predictable and trustworthy as the physical one is the most important thing Government can do to promote the new generation of internet entrepreneurs transforming Britain's economy—and the world's". Through Clause 7, where there are no specific statutory requirements as to form, the vast majority of contracts will be able to be carried out electronically. There are other cases, estimated to be as many as 40,000, where specific legal barriers exist to completing tasks electronically. They include barriers to electronic transactions between citizens and government, and between businesses, other organisations, citizens and third parties.

Clause 8 would give the Government and the Scottish administration the power to sweep away obstacles in existing laws which insist on the use of paper and formalities such as sealing, wherever it makes sense to do so, in order to give people the electronic option. This is a wide-ranging power but the Government believe that using secondary legislation to undertake the required modernisation is the most sensible way to proceed. The alternative of proceeding by separate primary legislation would waste valuable parliamentary time and was overwhelmingly rejected in consultation. On the other hand, allowing an electronic alternative across the board would risk creating uncertainty and confusion in those cases where the electronic alternative to a paper process was not obvious. I am glad that the Delegated Powers and Deregulation Committee was convinced by our arguments for proceeding in this way.

I am also pleased to inform the House of two early uses of this power, assuming parliamentary consent. We are consulting on a draft order to use the power to allow requirements of the Companies Act, such as incorporation, shareholder communications and the appointment of proxies, to be met electronically. The noble and learned Lord the Lord Chancellor would use the power to allow conveyancing to be carried out electronically. He expects to publish draft orders for consultation later in the year.

The Bill also modernises the out-dated system for modifying telecommunications licences. It is widely agreed that the current licence modification procedure requires urgent revision. A system devised at the time of privatisation to deal with a handful of telecoms companies has become swamped in today's market of hundreds of licensees. The current system requires the Director-General of Telecommunications to gain the written consent of all relevant licensees or to refer his proposals to the Competition Commission before proceeding with a licence modification.

The Bill puts in place a more efficient procedure. The director-general would be able to make fast-track licence modifications, without reference to the Competition Commission, in cases where either no relevant licensees actively object to the pay modification, or where a modification is deregulatory according to stringent criteria. These proposals would allow the fair and efficient development of telecoms licences and facilitate effective regulation of the telecoms industry.

Finally, I turn to the controversial issue of key escrow. That is the proposal that users of encryption should be required to deposit copies of the keys which protect confidential data with a third party. The Government have listened carefully to the views of business. The Performance and Innovation Unit study, published on 26th May last year, confirmed that partnership with industry, rather than mandatory key escrow, was the best way to meet law enforcement concerns. We have now written that policy on to the face of the Bill through Clause 13, which explicitly prohibits key escrow requirements.

It is fitting that this Bill is likely to be one of Britain's first 21st century laws. It would provide a sound legal basis for electronic commerce and electronic government, and it would help to build consumer confidence in buying on the Internet. It is a modernising Bill, which would bring the statute book in line with modern technology. I commend the Bill to the House.

Moved, That the Bill be now read a second time.—(Lord Sainsbury of Turville.)

6.40 p.m.

Baroness Buscombe

My Lords, I rise to speak to this Bill with some pleasure: pleasure that we have already achieved a great deal in another place in our determination to simplify the proposed legislation and ensure a light touch; and, further, that we have today an opportunity to address an exciting, fast-moving subject that is already impacting upon our culture and our thinking.

It is often said that if you stand still you will fall behind. With information technology you need to be on the run. Electronic commerce—the commercial application of IT— has already transformed the way that many companies do business. It provides access to larger markets, reduced operating costs and opportunities for customised marketing. Moreover, it is having a significant impact upon job creation worldwide. There are enormous potential benefits for the consumer, including increased consumer choice, lower prices and improved customer care. E-commerce's key to success in the global market rests upon its ability to compete, both in terms of cost and speed of delivery. There is no doubt that progress so far has been prodigious because the IT industry has been allowed to develop unfettered by rules and regulations. Thus far, it is a tribute to what we on these Benches mean by free enterprise.

Attempts to legislate on Internet matters are almost bound to fail at both national and European level because the market-place is global and "location" as such has become, for the most part, irrelevant. The Internet is capable of creating an important shift of power from government to the individual. That is bad news for the politicians and, in particular, those who hold the purse strings of government. Governments will attempt to arrest that. However, they may do so at their peril, since the change that has already taken place in a business's ability to communicate and contract across the globe means that it must be able to compete if it is to survive in the market-place.

That said, we on these Benches accept that there needs to be a framework within which all users can feel confident that, however they choose to interact or interface with electronic commerce, they are able to do so in a secure environment. In that context, governments can give limited assistance for the growth of e-commerce in three ways: first, by setting up recognised and certified systems for electronic signatures; secondly, by removing barriers to e-commerce and making it possible for any type of contract or transaction to be concluded over the Internet; and, thirdly, by providing a clear legal framework for e-commerce. That means responding where the current law fails to meet the needs of the user in an Internet context. For example, keeping the Internet free of fraud will require a change to the current legal principle that it is not possible to defraud a computer.

In the experience of those on these Benches, in consultation both with IT companies and with business, there are currently three major concerns in relation to locating electronic commerce activities: taxation, cross-jurisdictional transactions and an adequate resource of computer skills. In essence, a favourable tax regime, coupled with access to appropriate skills and the freedom to contract internationally, are key.

More interference by government than that and we run the risk of discouraging an industry, particularly business from outside the United Kingdom, from participating in electronic commerce in the United Kingdom. The Electronic Communications Bill does not deal with any of those issues. However, the Government need to address them, particularly in the light of what is already happening in Brussels. There is no doubt that, once again, we are witnessing ill-thought-through and confusing bureaucracy that will place increased burdens on business and could seriously hinder the growth of e-commerce across the EU. Consideration of the Electronic Communications Bill cannot take place in isolation without reference to laws which are impinging, and will impinge, upon the ability to effect and develop e-commerce here in the United Kingdom.

Let us take, for example, Article 15 of the draft regulations replacing the Brussels and Rome Conventions which will give consumers the right to sue an e-commerce provider in the consumer's own home courts. How will that sit with the draft directive on legal aspects of e-commerce? This directive applies the single market "country of origin" principle whereby service providers are regulated in the member state in which they have their main place of residence.

The net effect of this proposal would be to require someone doing business via the Internet to comply with 15 different sets of laws—indeed, 25 if enlargement goes ahead—in direct contravention to the home country control principle. In short, that is a mess and the Government need to put pressure on our EU partners to sort it out; otherwise many businesses, and in particular small and medium-sized enterprises, may well not bother with e-commerce at all as the risks will simply be too great.

I turn to the Bill itself. Part I establishes a part-statutory, part-voluntary register of Internet service providers. That remains a concern. We believe that the industry is best equipped to set standards and that it can be relied upon to do so without government interference. To that end, we would like to see the five-year term for the sunset clause significantly reduced.

With reference to Part II of the Bill, thanks to considerable pressure from both the IT industry and the Conservative Party during its passage in another place, it is now in much better shape to deliver all that we want to see in this Bill; that is, the establishment of a proper legal framework within which a person can contract with another and that the contract will stand up in law.

We are, however, proposing at Committee stage to consider further the status of an electronic signature as against a digital signature. We are concerned, for example, that the definition of an electronic signature under Clause 7(2) does not follow the definition in the European Electronic Signature Directive. In particular, there is no requirement that an electronic signature should have a personal element, nor that it should indicate approval of the data signed. In fact what is currently defined is more akin to a digital signature. I should like to know whether the Minister thinks that that matters.

Having listened to the Conservative Party and dropped the original Part III, which would have given law-enforcement agencies draconian new powers to demand the unscrambling of intercepted emails, the current Part III is a bolt-on extra. It provides a retrospective amendment to the telecommunications licence law. We believe that that part of the Bill must be watched closely to ensure, in particular, that there is no inequity among existing telecommunications licence holders.

In conclusion, our belief is that the Bill should be as light of touch as possible. It should act as a signal to the business world that the Government will not needlessly interfere, thereby leaving e-commerce to flourish for the benefit of all. An encouraging statement made by the e-Minister, Patricia Hewitt, in another place is worth noting. She said: I hope to see many of the Bill's objectives being achieved by selfregulation, so that we will not need to commence Part I". I very much hope that that approach will be sustained through the passage of the Bill in your Lordships' House and well beyond.

6.47 p.m.

Lord Sharman

My Lords, I am pleased to welcome this Bill as a valuable step forward in the promotion of e-commerce in this country. It states as its aim removing barriers and facilitating the adoption of e-commerce in the UK.

I am pleased to note the significant public consultation which took place in relation to the matter. That was widely welcomed by the industry. A number of concerns that arose from that have been addressed. In particular, I am pleased to see the removal of the key escrow provisions from the original Bill and the investigation and disclosure requirements, although I believe that we shall need to revisit that should those provisions appear later in the investigatory powers Bill.

I submit that, as enabling legislation, it is a light touch on the tiller. I like the idea of the voluntary code which is envisaged, known as the T Scheme. I believe that that is critically important in the development of e-commerce, particularly in view of the speed at which things move. I have said on previous occasions in this House that it will be difficult, if not impossible, for the legislative process to keep up with the speed of developments regarding the Internet. In that regard, it is interesting to note the new term that I became aware of relatively recently which is used extensively in net-based and web-based matters; that is, "dog years". It is based on the notion that when considering developments in technology, one should take one-seventh of the normal timespan in which something would develop and use that as a guideline. That means that we need to act with speed. Voluntary codes must be made to work to see us through that process.

I am pleased that not too much is proscribed in the Bill. The Internet is more than just a faster and more convenient way of conducting commercial transactions. It is not just a digital mirror of the conventional world, which many people suppose it to be; it is not just another channel of communication, nor another technology like TV or radio. There are many—I count myself among them—who believe that this may be the most profound agent for change in social and economic spheres in our lifetime.

The Internet is not essentially about computers; it is about the way that people use and interact with computers; it is about a new way of life. I see the Internet as being a force for change in five ways. First, it immediately overcomes the barriers of distance; distance is no longer relevant. Secondly, it brings buyers and sellers together immediately and one must therefore consider what will happen to the function of intermediaries, which are so much a part of many economies. Thirdly, it puts people on a level playing field, regardless of their status as either multinational corporations or single individuals. Fourthly, it enables complex alliances and gatherings of people to form spontaneously. Fifthly, it is the avenue through which ideas and knowledge can be made freely available. It is a powerful force for change.

A number of issues arise in relation to the Internet which, of necessity, could not be addressed in this Bill. We must ensure that what results from the development of the Internet is not a new divide— a digital divide, as opposed to a social or a class divide—between those who have access and those who do not. That may be due to age or inclination, but it is an issue that the Government must keep at the forefront of their mind.

How do we make access as widely available as possible? It may be through schemes involving terminals for hire, help with phone calls—in that regard the issue of metered phone calls will be critical—or in the further development of computers for schools. In that regard, I do not mean where computers simply sit in computer rooms to enable computer science to be taught, but where they become an integral part of the whole education process. Access may be created through schemes involving training for all people, which is clearly important. It may be necessary to encourage further places of public access. We already have cyber cafes; we could also have access in libraries and so forth.

The e-commerce revolution is happening today. It is moving at a speed which terrifies most of us in business. IT skills are critical and speed is of the essence. I welcome the Bill; I support it. It strikes the right balance between enabling legislation and voluntary regulation or voluntary schemes that can move at the necessary speed.

6.53 p.m.

The Earl of Erroll

My Lords, I welcome this Bill as a move in the right direction. The big problem with the Internet is that people can conceal their identities. It is important to know with whom one is communicating. From that point of view electronic or digital signatures are vital. They will give people confidence that they are doing business with the right party.

One anxiety about which I have received briefing is that the timing of the implementation of some of the provisions is being left to Ministers and they could therefore be implemented piecemeal. I cannot understand why we cannot make a blanket change and say that, given the right electronic signature and so forth, electronic documents will be as admissible as written documents with exemptions for certain vital classes. Why should it be necessary to amend around 45,000 different references to the written word, which would take a parliamentary lifetime? The real worry is that inertia will defeat the objective and, if we do not jump in with both feet, at the end of the day we will be left behind.

The whole issue revolves around the confidence of knowing with whom one is dealing and that to enter into a contract with them means that the contract will be binding. So the next stage must involve the legal admissibility of electronic documents. I understand that to be properly dealt with in the Bill. I am not a lawyer and I have not studied the matter in great detail. But I welcome the fact that the Government will not have total access to people's communications. They do not at present and there is no reason why they should just because we are going electronic. The fact that they cannot keep the key escrow is very powerful.

If the Internet is going to grow there should be minimum regulation. We cannot regulate in a vacuum; we cannot even regulate at a European level. There are no boundaries for the Internet. One of the great things about it is that it is possible to do business anywhere. One can, if one wishes, put one's website on a server sitting on the other side of the globe in a country that is not regulated. The great strength of the Bill therefore is that it does not try to do too much. It alights on one problem and tries to resolve that. From that point of view, people must have confidence that the self-regulatory scheme will work. If it does not, the Government must be ready to act swiftly. If people's electronic signatures are discredited, then doing business over the Internet will be discredited.

I am glad that the Bill does not regulate such things as personal data and their storage. They will probably be covered by the data protection Acts, which may not be as strong in other jurisdictions but, after all, we do not have to give our personal data if we do not want to. We can always opt out. The Internet does not force people to do anything; it is a facilitator. The Government need to introduce legislation which facilitates use of the Internet, makes it advantageous to use it and does not put people off using it. This Bill is the first step in the right direction of helping to facilitate Internet business.

6.57 p.m.

Baroness Dean of Thornton-le-Fylde

My Lords, first, I declare an interest as a member of PITCOM and of EURIM, but that does not mean that I support all their policies in this specific area of work.

When reading the papers for the debate this evening, my mind kept going back to the late Lord Chelmsford from the Benches opposite. He brought great expertise to our discussions in this whole field of developing communications and the changing of our lives electronically. I am sure that we shall miss his major contribution in our debate this evening.

I too welcome the Bill. In fact, much of the correspondence I received was in support of the Bill. There were perhaps a few "ifs" and "maybes", but the general impression is that this Bill is urgently needed; it is well placed in this area of e-commerce and we must get on with it. Although the Bill has such major support, some reservations have been expressed. I do not share any of those reservations because the Bill is written is such a way as to have a "light touch", which will enable us to deal with such situations.

The key point about the Bill is that it recognises that this is a tremendous opportunity for us. It is not just about electronic commerce; this is one of the spin-offs of the whole world of electronics and is presenting us with great opportunities. I know that we are basically dealing with the business element here, but we should also recognise the social changes that it is bringing about in our community. Indeed, it is a new language in its own right. You can sit round a table talking and someone may mention a new word from that language. Everyone sitting there will nod his or her head, but I am not so sure that everyone understands the new terminology. I include myself in that group.

The impact of electronic commerce on business will be enormous. If I want to buy a car in the future, I may well decide not to visit a car showroom; I may just put my request on the website and ask who is bidding. I may then choose the lowest bid. At present, you can actually buy holidays, and so on, by an auction that is provider-led. But this could well become consumer-led. Indeed, the whole concept opens up all these opportunities.

We see that the young are not put off by any of this new technology. Indeed, they tutor their parents on how to access websites, and so on. I am sure that many parents who trust the system enough at present to buy things on the web—there are too few of them—have been shown how to get on to the system by their children. There is also the development of that wonderful term "silver surfers". The whole concept spans all the ages and presents us with tremendous opportunities.

I enjoyed the contribution made by the noble Lord, Lord Sharman. He rightly said that this is a global business, whether it be buying or talking; indeed, the BT slogan "It's good to talk" is true. But this is a different way of talking: it is about families connecting all over the world, as though they in the same room. Eventually, of course, with further investment they will feel as if they are in the same room with video links.

The Bill is crucial to the speed of development. I may be wrong, but I actually believe that we are only—to use the vernacular—in the "foothills" of the possibilities that face us in the future in this area. Therefore, no traditional, statutory framework will suit it. However, that does not mean that the traditional values will not; indeed, I suggest that they will. When I talk about "values", I mean those of the "consumer"—a word which, unfortunately, has not been sufficiently used in debates on this subject. The consumer expects an honest deal. After making a purchase, he expects to receive the goods that he believed he had purchased.

In my view, the Bill reflects that "light touch, technology neutral" approach. If the legislation had been much firmer, it could well have proved to be out of date before it was signed, even if it is due to be signed in a different way from that which generally applies to Bills. As I said, there are enormous opportunities, but we cannot kid ourselves that there are no dangers involved. We have all read reports about money laundering, drugs and, indeed, the downside of this electronic world, including paedophile pornography. That is extremely damaging not only to those involved, but also to our society at large. We must somehow find a way to deal with that aspect.

I go along with the view that self-regulation is probably the right way forward for this kind of development. However, I shall not concentrate this evening on such potential risks, serious though they are. I agree with my honourable friend the Minister in another place who said: The first aim of the … Bill is to build trust among consumers and businesses in the providers of trust services".—[Official Report, Commons, 29/11/99; col. 43.] Certainly, consumer trust is essential. At the time that the Bill was going through another place, there were discussions with the Alliance for Electronic Business to develop a self-regulation approval scheme. This would be on the basis that the Government would set the public policy objectives and the industry would deliver solutions through self-regulation—perhaps by a kite-mark.

I believe that such safeguards are needed. The industry has sought the opportunity to provide self-regulation and, therefore, it is essential that it should deliver. Indeed, over the past few weeks we have seen the London Evening Standard starting to highlight some of the potential problems for consumers. It has set up an online system of "[e-mail]". I shall not name the companies that the public have actually gone online to complain about because they have not received the service or the goods that they thought they were ordering; and, indeed, for which they had paid online. It is just a window of what could happen if the industry does not deliver that self-regulation.

I was therefore delighted to see, and I very much welcome, the launch of Trust UK, in which my noble friend Lord Borrie is involved. It gives me confidence to know that someone of his experience and knowledge is involved in this project. I certainly wish it well. It has been set up as a government initiative but will mean that the Alliance for Electronic Business and the Consumers' Association will be working together. They will provide a code of practice for businesses for trading on the Internet. That has to be the way forward. I believe that there were about 200 people at that launch, most of whom represented organisations. If I read out the names of those organisations, I am sure that noble Lords would recognise them as household names. They include the Financial Times, the Royal Mail, British Telecom, ICL, as well as others, including Microsoft—that international company with a very dominant role in the market.

I have a question for my noble friend the Minister. It concerns something regarding notaries groups that I came across while I was reading the briefing for this debate. Apparently, they receive their terms from the Archbishop of Canterbury, although I have never heard this before. They have a role in signing off certain legal elements within the system. Of course, this has quite an impact. My noble friend may not be able to answer this question this evening; indeed, I should certainly be content if I did not receive an answer tonight. Nevertheless, the question needs to be raised. Are these people going to be involved in the work of Trust UK?

The banks, which will be crucial in the process, are certainly supporting it. However, it is interesting to note that, in parallel, they feel that perhaps an organisation called Indentrus (which is the global framework for trust services based on inter-bank co-operation) may well be more effective because it is a global impact organisation. There is also the view that cryptography, as we know it, may not provide the high-level security that may be needed for some of the trading online within a time-span of five years. When I read that wording, I thought that it was all gobbledegook, but I think I now understand it. It clearly demonstrates the language that is developing in this whole area.

Finally, I believe that the Government are right to hold statutory powers in reserve in case self-regulation fails. It shows that they are serious about consumer protection. However, I think that the sunset clause should give assurance to the industry that, if it delivers effective self-regulation, there will not be a need for statutory regulation. As noble Lords have probably gathered, I welcome the Bill; indeed, I am an enthusiast for this whole area. It provides us with a tremendous opportunity. If we have a debate on this in 10 years' time, I am sure that we will have moved on considerably in an area that is changing the very nature of the world in which we live.

7.8 p.m.

Baroness Anelay of St Johns

My Lords, I hesitated before I put down my name to take part in this Second Reading debate. I did so simply because I consider myself to be an amateur—indeed, a silver surfer—but an enthusiastic user of electronic communications. I do not understand how they work, but I am jolly glad that they do. I am most grateful to the noble Baroness, Lady Dean, for the very kind comments that she made this evening with regard to Lord Chelmsford for the work that he did for EURIM. I still think of him as my noble friend, even though he is no longer with us in this House or, indeed, alive. Indeed, he recruited me as a member of that body hardly before I had sat on these Benches more than a day or two. He was an enthusiastic recruiter.

It occurred to me that this Bill will have an effect on every enthusiast, or on anyone who at the moment has no idea that he or she will become a user of electronic communications. It seems at the moment that every time one picks up a newspaper one is assailed with stories of the Internet and with e-commerce and e-communications stories all jumbled up together, so that when the public see the prefix "e", they believe that e-commerce is being referred to. The climate is different to that of three years ago in which the previous government framed their proposals. E-transactions were then still very much in their infancy. It is right that the Bill should recognise that changed climate.

When I read the briefing of various organisations before today's debate it became clear to me that forecasts of how e-communications will develop are as many and as varied as the experts who are ready to give their advice. Tonight the noble Lord, Lord Sharman, said that things move at a stunningly rapid pace and mentioned "dog years". As David Williams of Morgan Stanley put it last week, Three months is the equivalent of an Internet year". However, perhaps one thing the experts can agree on is that, whatever the pace, it is fairly rapid.

What is the e-world in which this Bill will operate? New products are being rolled out at an amazingly rapid pace. In the past two weeks there has been a flurry of announcements from Abbey National, Barclays, Halifax and Lloyds TSB. On Thursday Abbey said that it planned to launch a net bank with venture capital support and would double its e-commerce spending to £200 million next year. The financial pundits have forecast that tomorrow more plans will be announced by the Pru regarding the future of Egg, its net bank. I can mention those companies because I am not a customer of either and therefore I have no interest to declare.

As such plans race ahead, there is also no stopping the online shoppers, to whom reference has been made this evening. This growth has occurred despite all the fraud scare stories, the odd hacker attack and sporadically incompetent retailers. According to the latest research by experts at NOP it is estimated that Britons alone will spend more than £10 billion online this year. That is a massive amount when one considers that we spent only about £3.2 billion last year, and less than £500 million the previous year. It is no wonder that almost every television advert that we see these days is Internet related.

A presence on the web is no longer a luxury or merely an eye-catching marketing tool for business; it is a necessity for those who want to keep pace in today's increasingly global commercial environment. But the kind of e-commerce that we hear about is simply the tip of the iceberg. The unseen, as yet uncelebrated, use of the net should be about moving core business processes online and re-engineering the way they work. However, many companies have delayed their e-business plans because of their security worries. I note that the not-for-profit IT organisation, InterForum, in its report Electronic Signatures—Signing up to the Digital Economy, states, According to figures from an NOP survey, while 76% of large British companies use the net and 76% have websites, 71% of large companies in Britain do not use the net to send confidential or sensitive information. To leverage its immense potential, the net needs to become a safe and trustworthy medium for even the most valuable and sensitive of transactions". That is why I, like my noble friend Lady Buscombe, welcome the Bill as a step in the right direction in ensuring that transactions over the net are safe.

How will the Bill make matters any better for users and providers of e-communications? I had intended to give an almost unqualified welcome to Part II of the Bill but having heard what my noble friend said earlier with regard to electronic signatures, I have a few qualms. On reading the Bill beforehand I had expected that it would provide that electronic signatures would be used only where a handwritten alternative was already provided for, and that the electronic signature would tie the message and the information to the person who had sent it so that one could prove who had sent it and verify the integrity of the information. On that basis I thought that the measure was an excellent move forward. However, having heard the comments of my noble friend Lady Buscombe, I should be grateful if the Minister would reassure the House with regard to the query about digital signatures and electronic signatures.

After all, the advent of electronic signatures and other technical advances all promise to make it safer to do business on the web. I am certainly aware that public bodies are planning to use electronic signatures and other public key infrastructure [PKI] technologies to push forward what they can do over the web. I was intrigued to hear the Minister mention that conveyancing would soon be put on the web. I look forward to seeing how that will operate.

Will the Minister tell the House whether the trials that are under way at Customs and Excise to establish the feasibility of filing VAT returns and making VAT payments over the net are progressing satisfactorily? Is there any information at this early stage on whether that business will be transferred to the web? If that is the case, I believe that businesses would welcome it as a way of ensuring that their returns have been received. They will not need to re-enter data and they will be able to hold on to their money for longer without risking late payment penalties. That subject is always of interest to businesses, particularly to small businesses.

Like my noble friend Lady Buscombe, I have some concerns about Part I of the Bill. I listened carefully to the Minister's introduction of the Bill. I look forward to examining those issues further in Committee. The Minister referred to the Select Committee's report and its recommendations with regard to Parts I and III. The noble Lord said that the Government would be prepared to accept some of the committee's recommendations. I hope that in Committee we shall have the opportunity to examine carefully all of the committee's recommendations. I hope that we can persuade the Government to accept all of the recommendations rather than just some of them.

Many noble Lords have said tonight that this Bill operates in a light touch atmosphere, one where extra regulation is introduced but may be welcomed. I welcome that light touch. I hope that anything that we do in Committee will maintain that light touch rather than seek to add additional regulation.

7.17 p.m.

Lord St John of Bletso

My Lords, I, too, welcome the Bill. I endorse the welcome for the Government's light touch approach and preference for self-regulation in this matter. I declare an interest as a director of an Internet solutions provider which provides both Internet connectivity and sophisticated Internet solutions for business. In my capacity of having run that company in the West End I can certainly bear witness to the extraordinary growth in the use of electronic commerce, particularly in the business-to-business market. The Internet may be full of uncertainties, but one area of agreement among industry pundits and executives is that the volume of businesses buying online will soon dwarf purchases by consumers. There is no doubt that electronic networks are dramatically changing the modus operandi of our corporate culture. I recall the speech made last year by the chief executive of Intel when he remarked that any company which does not transform itself into an Internet company in the next five years will not be a company. Perhaps that is a bit far fetched, but the pace of transformation is staggering as the world becomes ever more a global village.

While the United Kingdom and Europe have arguably been leading the development of new Internet technologies, I have certainly noticed that United Kingdom businesses are in many cases almost two years behind American companies in their appreciation of what the Internet can do for them. I totally agreed with the noble Baroness, Lady Dean, when she commented on many of the terms that are often referred to.

One of the roles of our company is to educate businesses as to the value of co-location, webstreaming, webcasting, virtual private networks, facilities management and of course the whole wide range of e-commerce solutions. Last year the trend in the industry was the race to establish dot.coms and portals. This year the focus has shifted to application service providers, WAP and enabling technologies, including the need to embrace and promote electronic commerce, which many refer to as "the holy grail of the Internet".

When this Bill was debated in another place, several Members expressed their concerns about the impediments in the United Kingdom to online shopping, both through the cost of installing a PC at home and the comparatively high costs of connectivity to the local loop. I am sure that many would have welcomed the Chancellor's recent pledge to reduce the costs of connectivity to the net.

The noble Lord, Lord Sharman, referred to the speed of developments in the Internet. While referring to PCs, I would draw attention to non-PC devices such as mobile phones. These are expected to out-sell PCs by 2002. The forecast is that they will outsell them by a factor of 10 to one by 2010. Within the next two years it is predicted that more people will be accessing the Internet through mobile telephones than through PCs. In the future a major part of personal communications, be it voice, data, images or video, will be wireless. The third generation technology developments anticipated in a few years' time will enable users of cellular devices to surf wherever they are, with wireless commerce set to soar.

The growth of e-business is being driven by several factors, including more intelligent software and technologies, an increase of e-business outsourcing, growing business sophistication on the Internet and of course the trickle-down effect of very large companies moving to web-based procurement systems.

I totally agree with the e-commerce Minister, Patricia Hewitt, in her foreword to the InterForum White Paper on electronic signatures when she said: one of the challenges for industry is to present the new technologies in such a way that electronic commerce is understood by both business and the public". Certainly the key to the success of electronic commerce is the necessity to ensure trust and confidence in this medium. Many recent reports confirmed both public and business concerns regarding the confidentiality and security of transactions made online. There is clearly a strong case for advanced authentification strategies in the light of the explosive growth in e-commerce, particularly in view of the trend in the United States and the forecast of the growth of e-commerce in Europe.

It is a well-known fact that online criminals have targeted victims through fraudulent billing of credit card numbers. Visa International recently reported that while the Internet generates only 2 per cent of its credit card business, e-commerce accounts for roughly 50 per cent of discovered fraud and billing disputes. Obviously a major part of that percentage concerns billing disputes rather than fraud, but it is still a staggering figure. Identity theft, when criminals assume their victims' identities to obtain credit cards and loans in their name and pillage their bank accounts, is another type of online fraud that is also proliferating. A skilled hacker can in many cases access a company's client database to obtain customer records and use this information to order credit cards or apply for loans in other people's names. I therefore totally agree that there is a strongly demonstrated need to protect individuals and corporations from these so-called cyber bandits.

I would again draw reference to the White Paper on electronic signatures, which aptly summarised the position when it said: To truly leverage its immense potential, the Internet needs to become a safe and trustworthy medium for even the most valuable and sensitive of transactions. What is needed is a mechanism to guarantee the integrity of information and provide relationships of trust that are the foundations of a commercial infrastructure". While I am inherently suspicious of regulating electronic commerce, I wholeheartedly support the objectives of this Bill, although I have reservations about Part I. I certainly hope that, in the words of the Minister, a market framework is built which creates trust in the authenticity, confidentiality and security of online transactions and confirms the legal validity of online transactions and electronic signatures. Ultimately, though, I believe in co-regulation, with the Government defining public policy objectives and the industry delivering solutions through self-regulation. I am pleased that the Government appear to support this policy, and therefore wish this Bill a speedy passage through your Lordships' House.

7.27 p.m.

Lord Evans of Watford

My Lords, may I first declare an interest as a director of an online company. I am delighted to welcome the Bill. It will give important assistance, reassurance and safety to the rapidly growing world of electronic commerce and communications. It is certainly vital to Britain's future economic well-being and is especially important as Britain has already secured a leading position, if not the leading position, in Europe.

I am especially pleased that the Government have adopted a "light touch" approach to the many thorny issues that surround this new and as yet only partially understood area of business activity. I say "only partially understood" because we cannot yet be sure how the arrival of instantaneous network communication will affect business methods, organisational procedures and the social life of this country.

Although the Internet and similar digital communication technologies have been in widespread use for around 10 years, we cannot yet know how society will adapt to such technologies, nor can we know the implications of such use that may emerge. One thing has become clear, however. The rate of change in our society has increased once again, perhaps to a degree it is still hard fully to appreciate.

Change in the Internet world is moving so fast that our existing mechanisms of lawmaking will not be able to respond quickly enough to regulate such activity in a timely way. It is for that central reason that I welcome the fact that in this Bill it is the framework and not the detail that is laid before us. In the Government's subsequent deliberations on topics which are not covered by the Bill—I refer to such issues as law enforcement agency access to encrypted communications and the right of citizens to absolute privacy in electronic communications—it will be helpful to remember that present legislative procedures are unable to keep up with the developments occurring in the digital world. This may require the Government to introduce broad-based legislation which gives Ministers of the Crown greater freedom to adjust electronic communications regulations.

Lest my comments be conceived as a proposal to weaken the democratic process, perhaps I may make it clear that any such powers devolved to Ministers and departments must be limited and, where appropriate, should be subject to retrospective review by both Houses. But some way must be found to allow government and departments to keep up with the developments of the Internet age. Our present legislative processes are woefully inadequate in a domain which is global, low-cost and moving at the speed of light.

Despite such an apparent challenge to our governmental processes, I wish to return to the contentious issues of unbreakable encryption and methods of providing lawful access to such encrypted material by our various law enforcement agencies. Along with other noble Lords, I was last year shown samples of a wide range of shocking material which is currently transmitted via public digital networks and which can only be described here as criminal in nature. In common with all other responsible citizens, I wish to support methods for the police and other security services to detect, hunt down and prosecute paedophiles, terrorists, drug wholesalers, currency counterfeiters and other criminal groups which are already taking advantage of strong digital encryption techniques to hide their activities.

I must make it clear that I believe Britain's future economic health is dependent on strong, unbreakable encryption techniques being freely available to lawful users without fear of government restriction, routine surveillance or any form of monitoring. In the future, the majority of business communications will obviously be digital and, as the degree of active, competitive, economic monitoring, analysis and commercial spying inevitably increases, business leaders operating within the UK must be certain that they can communicate lawfully in such a way that no law enforcement agency or other security service can intercept and interpret their lawful but highly sensitive communications without a court order. Such a freedom remains at the heart of our democracy and it will be central to our economic well-being.

Having presented that warning about issues which have been removed from the Bill and which are due to be presented on another occasion and having proposed that some mechanism for updating legislative detail without constant return to both Houses may need to be devised, I am extremely pleased to commend this excellent Bill to your Lordships.

7.32 p.m.

Lord Blackwell

My Lords, I, too, should declare an interest as an executive of a financial institution which is a member of a number of schemes which issue digital signatures and certificates.

I spoke in the debate last autumn on the gracious Address to welcome the promise of the Bill. Like other speakers, I welcome it again this evening. I said at that time that the impact of electronic commerce in revolutionising industry and commerce in this country was not well understood. Despite the publicity given to the dot.com revolution since then, that is still true. In particular, outside the House and the debate, there is not as yet a full understanding of the extent to which e-commerce and the Internet revolution will impact on major established corporations—those with established customer bases, brands and manufacturing processes—and the extent to which the changing interface with the customer will affect not only the customer but will have an impact all the way through the business system in terms of procurement and processing systems, with data passing through from one side to another, hardly touching the sides. It is that potential of e-commerce and the wealth creation and productivity improvements that lie behind it which are so important to the success of the Bill, as the Government and the Minister have recognised.

While welcoming the Bill, I should like to raise one or two queries regarding interpretation which it would be helpful to clarify during the course of its passage. The first relates to liabilities associated with the use of digital signatures under Clause 7; in particular, the question of who bears liability if a digital signature is accepted in good faith as evidence of a transaction and subsequently the authenticity or appropriateness of the signature is contested. The security around digital signatures could fail for one of two reasons: first, there is the possibility that the certification process of the person named as the holder of the signature may fail; the person who issues the certificate may fail to carry out adequate checks or to satisfactorily identify the bona fides, so certificates may be issued which are not backed up by the true identity of the person seeking to enter into the transaction.

The second reason concerns the security of the encryption and coding systems. The possibility of criminal elements attempting to keep one step ahead of encryption technology has been mentioned. I should not want to cast any doubts on the robustness of the encryption and security techniques being developed, but we are all well aware that it will be seen as a challenge to find ways around them. It is inevitable that those techniques will have to continue to evolve levels of sophistication to keep one step ahead. There will he additional challenges as encryption and signatures move into mobile telephony. As has been mentioned, the mobile world is likely to be a major area of use of digital transactions. Another factor will be the increasing use of smart cards as carriers of digital signatures, which will provide some additional elements of security but at the same time will create some new points of vulnerability as people find ways of reading the codes on cards through one means or another.

Therefore, we must accept that there will be cases where digital signatures accepted in good faith will turn out to be contested on the grounds either that someone has intervened fraudulently or that the certification itself has turned out to be inadequate. My assumption is that the framework of law will recognise that those who accept signatures in good faith will have the right to claim against those who offer them digital signatures and that those individuals providing digital signatures will in turn have the right to claim against those who provided them with encryption systems and certificates. No doubt it is anticipated that different levels of guarantee will be provided by those providing digital certificates and those providing encryption systems to guarantee different levels of security for what they are offering. In that framework, protection will be given, liabilities will be provided and insurance taken out to ensure that claims may be met. The Bill does not relate only to the consumer world of smallish purchases over the net but also to the use of digital signatures and encryption techniques to protect commercial and financial market transactions which may run into not only millions but hundreds of millions of pounds.

I believe that there is a presumption in the legislation. For example, paragraph 43 of the Explanatory Notes states that, It will be for the court to decide in a particular case whether an electronic signature has been correctly used and what weight it should be given (e.g. in relation to the authentication or integrity of a message) against other evidence". As a non-lawyer, it would be helpful to me at least— and it may be helpful to others—as we go through the Bill to clarify exactly how the courts will interpret the liabilities for digital signatures and certificates and how that process will work.

I should like to raise a second point. Like other noble Lords, I very much hope that it will remain a voluntary scheme, but if the Government find need to use Part I and keep a register of authorised certificate issuers, what liability might then fall on them? What will be their liability if they authenticate people who turn out not to be providing certificates of appropriate integrity or people who do not have appropriate checks behind them? If that part of the Bill were used, how would the Government deal with that liability or apparent liability?

My third point concerns the Government's intention in accepting digital signatures for payments from organisations and citizens, both in terms of the use of digital signatures and certificates in government procurement and in the consumer sector with regard to the use of digital signatures on smart cards for benefit payments and tax payments. The Government can be a major force for change. The procedures and standards they seek to adopt in their own rules of engagement will set standards that will have an impact on the rest of the industry. It would be helpful to know what the Government plan in that area and how they will develop their behaviour.

My fourth and final point concerns protection of information. I welcome the prohibition in the Bill. Equally, it would be helpful if the Government could clarify what, if any, ability the Government or government agencies have under the Bill to intrude on private information. Are there any circumstances or provisions under which that would be permissible?

The points I have raised are points of clarity and not disagreement. Like other noble Lords, I wish the Bill a rapid passage through the House and look forward to it being on the statute book.

7.42 p.m.

The Earl of Liverpool

My Lords, I rise to speak in this debate as one who embraces new technology and the positive good it can do for mankind. I enjoy the instant communication and access to information of all kinds as well as the ability to trade online. There seems to be no limit to the potential of this relatively new medium and its power is quite literally awesome.

At this stage I should perhaps declare my only other interest. Like the noble Baroness, Lady Dean of Thornton-le-Fylde, I am a member of PITCOM. I should like to take this opportunity to thank her for her kind remarks about my late friend, Lord Chelmsford.

We are living in an age where the speed of computer technology and the Internet are literally transforming the way we communicate and do business. It is, I believe, more significant, more far reaching and indeed more durable than the period of the Industrial Revolution, a point made by the Minister in his opening speech. Therefore, the legislative framework that we introduce to ensure order in this fast-moving world, while at the same time giving UK plc full entrepreneurial opportunities in this field, is of enormous significance.

The Bill goes some way along that road and I therefore join other noble Lords in giving it my general support, although I am concerned about one or two aspects. The voluntary industry scheme—or T Scheme as it is called—does have its merits and it has the general support of the CBI, the British Bankers' Association and many others, but what worries me is that the Secretary of State has up to five years to introduce the framework of Part I of the Bill by statutory instrument. My concern in this regard is that, as I have already mentioned, technology is moving at a remarkable pace and indeed it is common for major hardware and software upgrades within the industry to take place at six-monthly intervals or even less.

The scenario I invite noble Lords to consider is that if the Secretary of State deems it necessary to lay before Parliament a statutory instrument in, say, three or four years' time, the entire landscape will have been transformed from what it is today. Given that we simply cannot predict what e-business will look like in even two years' time, I am a little uneasy that the Bill does not allow for the approval scheme to be subject to formal consultation before its implementation. If that could be written into the Bill it would enable all interested parties to make state of the art contributions and ensure that Part I of the Bill met the then needs of customers and suppliers alike.

I have heard it said that legislators should be likened to hedgehogs on the global super-highway because they tend to get run over and squashed! I am not saying that this creates a convincing argument for doing nothing, but it is important to recognise that it is indeed a global business and the technology exists to provide encryption services anywhere in the world. Many service providers have their servers located in countries other than the one in which they provide services. This could be a matter for concern because it might enable encryption service providers to claim immunity from T Scheme and United Kingdom legislation.

I turn now to Clause 7, which is the heart of the Bill. Clause 7 gives legal recognition to electronic signatures. On the passing of the Bill, the scene will be set for these electronic signatures to be used to authorise a wide variety of transactions with values ranging from pennies to many millions of pounds. Users will expect the level of authentication of such signatures generally to reflect the value of a transaction. For many users, low-cost certification will be sufficient, but, as I understand it, Clause 7 as currently worded requires a level of certification which would make low-cost certificates legally inadmissible. I should be grateful if the Minister could tell be whether my understanding is correct. Depending on his reply, this may be an area I would like to return to at later stages as I am anxious to ensure that the Bill does not inadvertently restrict the development of low-cost electronic commerce services.

E-business is fundamentally changing the telecommunications markets. The most obvious example of this is the rapid growth of Internet service providers—ISPs—offering free access and achieving huge market valuations. For example, the company Freeserve was valued at more than £2 billion within a year of its launch. This is resulting in the building of new IP or Internet protocol-based networks which will be able to carry Internet traffic more efficiently. These networks will also carry voice-over IP calls, potentially by-passing all or part of the existing switched telephone network. As if that was not enough, as the noble Lord, Lord St John, said, the mobile networks will be licensed later this year to provide and develop WAP—wireless access protocol—technology which will enable them to provide similar services to those on the move.

Telephony and multimedia services will increasingly be bundled together by third party service providers as well as network operators. In a few years' time all this could result in people taking their multimedia services—that is to say, telephone, e-business and entertainment—from one service provider in a fiercely competitive market. This is all exciting stuff and, I think, good news for the individual customer. But there is a worrying aspect which has already been mentioned. Internet fraud is a growing problem and people need to be reassured that this is a safe medium in which to conduct business.

By way of example, I should like to draw attention to a recent story of some professional hackers who managed to gain access to credit card records on a major service provider on the Internet in America and "stole" 15,000 records—that is to say, all the essential information they needed to use the cards fraudulently. As I understand it, those cards have not so far been used for any illegal trading but it shows the power and persistence of those with criminal minds who are always looking for a way to exploit the system.

I believe that the Bill goes some way towards increasing confidence and sending a message that this country is serious about playing a leading role in ensuring that that happens. As legislators, we shall have a big challenge in the future to create durable laws and regulations with a light hand and not get squashed by the tremendous global flow of traffic down the Internet super-highway. With the slight caveat in my earlier remarks, I wish the Bill well on its passage through this House.

7.50 p.m.

Lord Haskel

My Lords, I, too, am a member of PITCOM and of EURIM. I should like to join my noble friend Lady Dean, the noble Baroness, Lady Anelay, and the noble Earl, Lord Liverpool, in remembering Lord Chelmsford. I certainly remember him discussing these matters and drawing our attention to them five or six years ago. He was certainly well ahead of the times.

I thank the Minister for explaining the Bill. I agree that the Government were absolutely right to take out of the Bill the demand that the key to the de-encryption of material be deposited with a third party. It would have been both unworkable and a possible violation of people's human rights. The Government were right to avoid those difficulties.

All speakers have referred to the fact that business on the Internet is evolving fast and that we are going through a time of great change. The noble Lord, Lord St John, told us that we shall be able to access the Internet on our mobile phones and television sets. Of course, we no longer only shop on the Internet; we also access services: we do our banking, make our travel arrangements, complete our tax returns and do all kings of things. Indeed, these changes are being urged on us by means of the discounts that are offered to use the Internet. That may be one reason for the speed of change. However, that change brings its own confusion and problems.

That is why the Government are wise to suspend Part I of the Bill. I hope that the cold storage will last for the full five years. Judging by the rate at which things are changing on the Internet, conditions will be vastly different in five years' time. Who knows what new developments await us round the corner?

I agree with my noble friend the Minister that the value of consultation at times of rapid change is enormous. The value is that the Government are much closer to the market. That is why the T Scheme being prepared by the industry is so valuable—because it comes from the market. However, that spirit of consultation and partnership should be extended to the actual approval of the scheme. As I understand it, the Bill says that there should be statutory approval of the verification services.

Like the noble Earl, Lord Liverpool, I believe that the Government would be very wise to allow for the actual approval scheme to be subject to formal consultation before it is approved and implemented. In that way, the spirit of partnership and consultation would be maintained which is so valuable in such a fast-moving and changing scenario.

There is another aspect of the Bill where I believe that mistakes can be avoided. I refer to the part dealing with the way in which commerce is undertaken. At present, all of us, including the Government, see e-commerce as different from conventional commerce—"c-commerce", as it may be termed. The difference lies partly in the hype and partly in the impact and novelty of e-commerce; but it also lies partly in the fact that there are a lot more controls over transactions on the Internet. Phone lines are regulated; bandwidths are auctioned by the Government and controlled by them; whereas with conventional commerce there are no such controls. As the noble Baroness, Lady Buscombe, seemed to indicate, one of the reasons why c-commerce has flourished is the absence of controls.

I am going to make a prediction; and I am well aware of the dangers in so doing. The prediction may be obvious, given what has been said in this debate. It is my belief that in five years' time those controls will have gone, and that we shall not have separate e-commerce and c-commerce. They will have come together, and we shall just have plain commerce.

How will that affect the Bill, and how can mistakes be avoided? Perhaps I may give an example. People are buying ordinary things such as books and sacks of potatoes over the Internet every minute of the day. However, two weeks ago, I saw an announcement in the newspapers that someone was selling a gas-fired power station over the Internet. Over the years, c-commerce has developed hundreds of ways of verifying transactions. There is a simple and low-cost way of verifying the sale of a sack of potatoes, but it is vastly more expensive and complicated to verify the sale of a gas-fired power station.

As the noble Earl, Lord Liverpool, pointed out, it is not clear that the Bill allows for the varying ways of verifying signatures. Clause 7 deals with that, and I am not sure whether it provides the certainty that low-cost certificates are as admissible as full certificates. A simple e-mail could verify the signature for the sale of a sack of potatoes, but it manifestly could not for the sale of a gas-fired power station. My point is that we must make sure that the Bill allows for normal flexible business practices in anticipation of e-commerce and c-commerce coming together.

I certainly welcome the Bill for what it will do to encourage and facilitate commerce over the Internet; and for the good example set by the Government. They have promised that businesses will be able to make their VAT and PAYE returns and to file returns at Companies House over the Internet, while also being paid by the Government for the supply of goods and services. That is all very good. Surely everyone will support legislation designed to reduce paperwork.

At the same time, however, the Government have to regulate and discipline transactions using the Internet. Achieving the balance between discipline and encouragement is difficult. It is difficult because the development of the knowledge economy happens in surprising ways. In Brazil, for instance, there is a popular portal run by a branch of the Church called "The Portal to Heaven". I have not actually tried it, but obviously someone is trying to use the knowledge economy to replace prayer and to provide virtual salvation!

More down to earth is the fact that Cisco, with 26,000 employees, is able to operate its huge business by owning only two plants, but owning the knowledge of a further 30. That is the way things are going. Those are the complex alliances about which the noble Lord, Lord Sharman, spoke.

These surprising new ways of doing business give rise to several problems for the Government, particularly for the Treasury. It will become much more difficult to identify transactions and the paper trail that supports them in order to determine duties and taxes due. The noble Baroness, Lady Buscombe, is shaking her head. I know that she commented on that, and I entirely agree with her.

My noble friend Lord Evans spoke about this problem in relation to criminal activity. In order to obtain information that proper taxes and duties are being paid, the Government may well have to insist on decoding encrypted messages and signatures. I know that with the use of some clever joined-up government, the Minister has transferred much of that responsibility to the Home Secretary. However, it is something that his department will need to bear in mind when finding the balance between regulating business on the Internet and encouraging it. Indeed, the Government may well face challenges under our human rights legislation, after it comes into effect in October. Within the EU, that is less of a problem, because the Bill goes a little way towards harmonising electronic signatures in the internal market in Europe.

There is another aspect which touches on human rights. My noble friend Lady Dean spoke about consumer values, and she has a point. One big difference between shopping on the Internet and shopping in a store is that in the latter case when one looks at the merchandise the shopkeeper knows nothing about one. Therefore, the customer is king. When one shops on the Internet, the situation is reversed. The moment one logs on to somebody's website to look at the merchandise, one announces one's presence and immediately information about one is called up. It is not very sophisticated at the moment, but it will become far more so. I envisage that in future this may be used for price discrimination. The price of goods offered may be adjusted unfairly to manipulate one's pattern of purchases.

Encryption and secure electronic signatures can play an important part in maintaining a shopper's consumer rights and anonymity. This is best left to voluntary arrangements and consultation in regulating cryptography services. But I believe that the Government should be aware of that need when framing the legislation.

Other noble Lords have spoken of trust. As e-commerce and c-commerce come together, the old habits of dealing with trusted suppliers of goods and services will still apply in spite of the rapid changes to which noble Lords have referred. To know with whom one is dealing is a concern of the noble Earl, Lord Erroll, who is not in his place. I believe that that is especially the case in business-to-business commerce.

As far as concern consumers, the fight for their business over the Internet is on. That explains some of the huge advertising campaigns that we now see about the reliability and fairness of different content providers. I agree with the noble Lord, Lord St John of Bletso, that in the end we shall deal with the suppliers and the content providers whom we trust. As in the past, that will be our greatest protection. Plus ça change, plus c'est la même chose.

8.2 p.m.

Lord Lucas

My Lords, I start by declaring an interest. I run a small e-commerce business. My expenditure substantially exceeds income and, therefore, I should be worth millions. However, I appear to have missed a trick. I welcome this Bill. It is enormously important that we set our rules and regulations in a way that attracts e-commerce to the UK. It is by its nature such a mobile beast that it will find a home wherever it is made most welcome and where the regulations imposed on it are those which the eventual consumer finds sensible. It is the consumer who decides which particular e-business flourishes and which goes to the wall. In that context, I believe that the Bill is a useful contribution.

I hope very much that the Minister will bring us up to date on where we are with European legislation which will have an impact in this area. In particular, I should like to end up in a situation where if I, as a UK businessman, decide that my contracts with third parties all over the world shall be governed by English law that will be respected by the EU when it comes to judge whether or not I have broken those contracts. At the moment, it appears that the EU seeks to make me subject to the legislation of 15 different countries. Perhaps in some senses the Financial Services and Markets Bill takes the same attitude; namely, it seeks to impose UK legislation on a lot of foreign transactions. I should be grateful to hear a statement of principle from the Government so that we have an idea of where we may be going.

I like Part I of the Bill. Section 5 of the report [e-mail] is thoroughly useful and I commend it to noble Lords. It sets out clearly the right relationship between government and the market. One wishes that other departments of the Government had read it and adhered to it. The report sets out four principles. First, the Government should provide a light touch regulatory and tax framework. Part I fits into that pattern extremely well. The idea of having reserve powers and allowing the market to develop with that in mind seems an excellent way of ensuring that a fairly unprepared, diverse and, to some extent, reluctant business community does what it should do. I hope and expect that that will succeed.

Other government departments do not take that attitude. HM Customs and Excise is particularly awkward to deal with. I have a particular problems in deciding where an overseas customer is resident. I trade in knowledge, not physical goods. HM Customs and Excise will not give me any help in identifying what evidence it requires to establish that one of my customers is outside the EU. I do not believe that that is the right attitude. I understand the problems of HM Customs and Excise. However, I believe that it should be proactive in trying to help businessmen to do business internationally over the web rather than lay sticks over the elephant trap in the hope that they will break under the weight of being trodden on.

The second principle set out by the report is that the Government should act as a catalyst for change. I believe that Part I of the Bill satisfies that entirely. Many of the Government's activities in this area are sterling examples of the Government at their best in dealing with these aspects. The third principle is that the Government should ensure that e-commerce developments contribute to the creation of a strong and fair society. As to that, there is a great deal to do. This fast developing market is one which naturally creates monopolies. Businesses band together just out of fear of the pace at which the market changes. They try to hold on to bits of the market to look after their own interests against the interests of the consumer.

The prime sinner is, as ever, British Telecom. For years it delayed pricing ISDN properly. The service was so expensive that it was out of the reach of people. BT brought it down to a proper commercial price only when the service had scarcely any advantage over ordinary moderns. Not surprisingly, it has not been able to do much with it. Now BT is entrusted with the introduction of a crucial piece of new technology: ASDL (asynchronous subscriber digital lines). I do not know whether many noble Lords have seen the speed of Internet access that is available through the new Library terminals. Pages flick across the screen so fast that one scarcely sees a change. When one tries to dial in over the old network one must wait 15 or 20 seconds before the next page chugs along. ASDL is about 20 times faster than the ordinary dial-up access and will make an enormous difference to how the web is used.

ASDL is the equivalent of mobile telephony for the web in terms of usefulness. People will be prepared to pay the kind of price that the French are being asked to pay for ASDL access, which is about £250 a year. BT proposes a figure of about £1,000 a year. That is not right. This is a crucial development, and if the UK is to remain the centre of innovation in e-commerce we must get it right.

Other aspects of big business practice have been mentioned; for example, the problems of credit card acceptance in relation to new small businesses. I refer to the waiting period that is traditionally required before one can use credit cards and, therefore, gain access to online payment systems. We must bear in mind the effects of social exclusion which will result if we do not open up the web to all kinds of businesses and people in this country. I believe that we can look back with pride at the penny post as an example of the kinds of things at which the Government should aim. Clearly, that was something which cost the residents of London who could have had it a great deal cheaper. Nonetheless, it was immensely beneficial to the country as a whole.

The Government need to pay attention to the infrastructure, the underlying rules and regulations of the network. In Committee we shall be able to discuss the Government's attitude to Spam. Laws in California seem to have made a reasonable start in dealing with that plague. I should like to discuss whether the Government are prepared to consider going down that route in the UK.

We also need to cover quality assurance. There was mention today of Trust UK, an organisation for which I have little time. It is an amalgamation of trade associations. To combine an amorphous group of trade associations, with little budget and insignificant government backing, and produce something in which people will believe I find a ridiculous idea. Trade associations are worse than the BMA in general. For ordinary customers to rely on a group of them is not the right way forward.

There is hope—the action may be too slow and too late—that the accountants may produce some provision. They are supposed to be good at auditing and assuring the public that something is as it is supposed to be. They can adjust to providing services to small and large businesses. They should have leapt to provide such a service; they have not done so. I am part of that profession and I am sorry; I hope that the situation will be remedied soon.

The fourth criterion that [e-mail] asks of the Government is that they act as an exemplar. In many ways that is right. I was disappointed by the reaction of the Government Front Bench to my recent questions on improving Hansard. The Government do not seem to be looking positively at what they can do with new technology to make all our lives easier or considering methods which are not possible with a paper-based system but are possible in electronic terms.

I turn to Part II of the Bill. Over several years we shall be faced with a complex series of regulations some of which raise difficult questions. I look forward to considering in Committee whether they can be settled by negative procedure. In the passage of those regulations we shall find it difficult to know the circumstances in which an electronic signature is valid and when it is not. I wish to pursue with the Government the concept of an individual or a business stating that he or it will accept an electronic signature in all circumstances when legislation or other custom would require a written signature, thereby bypassing the slow, difficult-to-discern passage of legislation. For instance, Westminster City Council might say, "We will accept all notices required to be given to us in electronic form with an electronic signature. We do not have to wait for the Government to pass all the necessary legislation to make that a consumer right." In other words, until the Government pass such legislation, I would not have the right to serve those notices by e-mail, but an individual council might make it possible for me to do so. It would wish to be certain that everything was made valid by electronic signature.

I wish also to pursue proof of delivery. I have not seen the issue discussed anywhere. It is a difficult concept as regards e-mail. I do not know how the Government imagine that that concept will be tackled. I am concerned about the "believability" of signatures. I should like to pursue in some detail in Committee the precise way in which we are to understand that an electronic signature represents a person. If I am buying a house from a person, I know through a chain of people that that person exists. I have talked to my solicitor who has talked to another solicitor. Solicitors know and trust each; and there is a client at the other end. Even if I have never met the person there is reason for me to believe that his signature on a piece of paper has reality. How do I achieve a similar state of belief with an electronic signature? I may not be able to make the same connection through to the person making the signature.

The only matter I wish to pursue in Part III relates to social exclusion and ASDL. If we do not do something about telecommunications licences there is a strong chance that people in the countryside more than three miles from a main exchange will be excluded from the ASDL network. It is not technically possible to run an ASDL line more than three miles from an exchange. However, the mobile telecommunications companies have masts all over the countryside. Few homes are not within three miles of a telecommunications mast. As part of the permission by the community to have those masts in the area, there should be some obligation on the owners of the masts to provide ASDL connections from those masts to local houses. I do not seek to put that provision in the Bill, but I should like to discuss the issue. I can see no other way in which ASDL will be brought effectively into the countryside.

I welcome the Bill. I was worried when the Minister said that Bill Gates liked it. I use a lot of his software every day, and bug-ridden, ill-documented, unreliable stuff it is. I hope that his was a general welcome rather than a comment on the quality of the clauses. I look forward to hearing the Minister defend them in Committee.

8.16 p.m.

Lord Razzall

My Lords, I join with every noble Lord who has spoken in the debate in welcoming the Bill in general terms. I like the idea at the beginning of the millennium of passing a Bill providing a framework for the regulation of what will undoubtedly be the medium of the new millennium.

I welcome the change of heart on a number of points by the Government and the Tory Opposition. On the Tory side, I welcome the fact that it has changed its position radically from that of another place. On Second Reading, it moved that another place, declines to give a Second Reading to the … Bill because it introduces a completely unnecessary element of regulation in the supervision of electronic commerce". I am delighted that the Tory Front Bench has moved away significantly from that position and is joining in the general unanimity with which the principle of the Bill is now accepted.

I am pleased that the Government have moved away from their position on a number of issues relating to the Bill. From these Benches, we are delighted that they have chosen not to put in what was originally Part III of the Bill. It may be brought back in more appropriate form later in the Session. But that has not stopped one or two noble Lords from making the speech they would have made if Part III had been included in the Bill in its original form.

I am delighted that the Government have acceded to the recommendations of the Delegated Powers and Deregulation Committee. The Minister indicated that he will bring forward amendments. I share the view of the Internet Services Providers Association, whose chairman said that, Government has heard the voice of the Internet industry in the United Kingdom and chosen to explicitly reject the use of key escrow as a legal requirement". I am sure the House will be pleased that the Government have recognised the pressure from the Internet industry on that issue.

I share the concerns of the noble Lord, Lord Lucas, regarding the wide endorsement of the Bill by Microsoft. When I read, as did a number of noble Lords, that Microsoft entirely welcomed the Bill and regarded it as a model for future legislation throughout Europe, I began to wonder whether the support we were giving the Bill should be rethought marginally. No doubt we can contemplate that when we discuss the detail in Committee.

But, of course, after taking out all the things that the Government have taken out—the Minister described this as "a light and regulatory framework"—I suppose we could also say that the Bill is now a rather short and meagre affair. There is an element of slight cynicism in wondering whether this Bill is now put forward, having had everything taken out of it, because the Government had announced in the Queen's Speech the year before last that they would put forward this Bill and therefore now feel that they must put it forward; but that is perhaps unnecessarily cynical. Nevertheless, although we generally support it, we will from these Benches, and no doubt from the Opposition Benches of the Conservative Party, wish to deal with specific matters as it passes through Committee.

There are a number of points on which we wish to probe the Government. With regard to the first part relating to the creation of a register of approved providers of cryptography support services, we will probably not wish to re-visit the argument that was advanced in another place as to whether it is better to wait to see if these powers are needed before legislating. The other place has decided that that is the best way to proceed. The Minister indicated that he hoped that the powers would not have to be exercised, and I do not believe that we need to re-run the argument as to whether in that case it would be better not to have them at all. However, there are one or two points in that section on which we shall wish to probe the Government.

First, with regard to Clause 2(3)(d), we wish to go into some detail about what is meant by, a fit and proper person to be approved", which raises a number of issues that will be worthy of discussion. Secondly, in relation to that section, we wish to probe the question of what information can be disclosed in connection with the investigation and prosecution of crime. There clearly is an issue here as to whether similar protections that are applicable under the Data Protection Act ought also to be applicable to this section. These are matters with which we can deal in Committee.

The second part of the Bill allows electronic signatures and messages to be treated in much the same way as paper ones. There are some points relating to this matter with which we wish to deal in Committee. First, there is a view that the Government have not quite gone far enough in this Bill to ensure that electronic signatures will achieve parity with hand-written signatures. The Irish Electronic Commerce Act, the Uniform Electronic Transactions Act in the USA and the Uniform Electronic Commerce Act in Canada go somewhat further than the Government are now contemplating and we shall wish to probe that area in Committee.

Leaving aside detailed comments on the Bill, Patricia Hewitt, the e-commerce Minister as she is known, has indicated that the purpose of this Bill is to encourage growth in electronic commerce. The Minister also indicated this evening that that is the purpose of the Bill. If we believe, with my noble friend Lord Sharman, that the creation of the Internet is the most significant commerce development of our lifetime, this Second Reading provides an opportunity for us to comment on what we feel is missing from the government rhetoric, if we are talking about a Bill which is designed to enable electronic commerce to thrive. After all, most of the provisions of the Bill are prescriptive rather than enabling, and most of them go to create a form of regulation and restriction rather than encouraging electronic commerce.

There are a number of questions—I can certainly list three—that I would like to put to the Minister in relation to what the Government are proposing to do in order to enhance electronic commerce in this country. First, it is all very well to say that electronic commerce and the use of the Internet will be enhanced by making a large number of free computers available to schoolchildren and to institutes of education, but that will not be an adequate response to the modern age if adequate training provisions are not put in place. We could have free or subsidised training in local colleges, in schools, in community centres, to ensure that the less privileged in our society have an opportunity to access this key medium.

Secondly, the point raised by the noble Lord, Lord Lucas, is fundamental to the development of electronic commerce in this country. We have seen in recent days a large destruction of the BT share price as a result of the Chancellor of the Exchequer's remarks. However, as was indicated by the noble Lord, Lord Lucas, it is not only access to the Internet by ordinary people in their homes and the price of that access that are relevant. What in many cases is more relevant is the whole issue of the cost of broad-band access, the cost that is relevant to enabling particularly small and medium-sized businesses to sign up to the Internet. They will not be able to access the opportunities that are available to them unless the cost of that access is reduced. In terms of determining government policy, this is one of the most significant things that the Government can do to further the growth of electronic commerce.

Thirdly, there are a number of areas in which the Government can take a lead by making more government products available online: TV licences, driving licences and tax returns could all he made available online electronically to the public. That is an example which could be set by the Government to demonstrate their commitment to the development of the Internet.

In conclusion, we on these Benches welcome the Bill and we shall probe the detail in Committee. However, we feel that it is marginally long on rhetoric and slightly short on practical help to the industry.

8.26 p.m.

The Earl of Northesk

My Lords, we have had a most illuminating debate, and I congratulate all noble Lords who have taken part. I would particularly like to associate these Benches with the very kind and generous tribute paid by the noble Baroness, Lady Dean, to my noble friend Lord Chelmsford. This would indeed have been grist to his mill, had he still been with us. Like all noble Lords who have spoken, I congratulate the Government on introducing this Bill, though I should say that our welcome for it here owes a great deal to the fact that the Government were so receptive to our suggestions in another place.

We all have our own preferences for defining the pervasive and meteoric rise of IT. I need not dwell on that. What surprises me, however, is the degree of hyperbole with which IT is so often wrapped. While not wishing to attract the slur of being labelled as a "dark force of conservatism", I maintain that our perceptions about IT need to be tempered with some caution. We can be too tempted into viewing its benefits through rose-coloured spectacles. While it has a huge potential as a force for good, it also has a capacity to create new and unforeseen problems. For example, there was a news report over the weekend about the so-called "dot.com down-and-outs". As the Select Committee of another place put it: Public policy must not be transfixed by technology, but it must be informed by it and might be transformed by it". In other words, we need to bear in mind that for every boon that IT may bring, it may also create an associated matrix of problems.

With that introduction, I move to consider the Bill itself. I say at once that we on these Benches support the principle which underpins the Government's thinking. The litmus test by which this Bill should be judged is the extent to which it will facilitate the use of electronic communications and electronic data storage. Will it encourage or impede the development of e-commerce?

As the Minister explained, Part I provides for a statutory and voluntary register of approved providers of cryptography support services, the Government's "co-regulatory" approach. The mood music of the Government—and, incidentally, of the noble Lord, Lord Haskel—is that it is their abiding hope and expectation that this scheme will never be implemented. The Minister near enough confirmed that today. Here, the scheme being promoted by the Alliance for Electronic Business is well-advanced. Again, the Minister confirmed that the Government are satisfied with its progress so far.

More than that, and as other noble Lords have observed, Clause 15(3) has been expressly framed to repeal Part I if no order to give effect to its provisions has been tabled after five years. Fair enough, but this sunset clause begs the question as to why we are being asked to legislate for something that the Government, on their own admission, have neither a desire nor an intention currently to implement. To this extent, it could be interpreted that Part I is little more than legislation for legislation's sake, regulation for regulation's sake.

The Government have argued that they are simply following the recommendation of the Select Committee of another place. Equally, we on these Benches accept and welcome the fact that the part is framed to be as technology neutral as possible. That may be so, but, as all noble Lords have said, technological advance in IT is explosive. As my noble friend Lord Liverpool made so plain, there can be no guarantee that the current drafting will remain in step with that advance.

Consider this: A Bill takes at least a year to get through Parliament. Given the pace of the Internet, it's likely to be out of date even before it comes into effect". Those are not my words; they are the Prime Minister's.

Of course governments need flexibility. Order-making powers are the ideal mechanism for its delivery, particularly with respect to technical aspects of public policy. But, like the Delegated Powers and Deregulation Committee, we feel that this is too important, too significant, an issue to be left to the whim of an individual Secretary of State effectively free from proper parliamentary scrutiny. While grateful for the Minister's concession, we remain concerned about the possibility of a further "stealth" e-tax being levied on the industry by means of any fees required from those signing up to a voluntary/statutory scheme. Hard on the heels of the IR35 provision, which may result in the loss of £1.9 billion-worth of UK IT consultancy fees, at a cost to the Exchequer of £760 million, this would be antipathetic to the advancement of UK e-commerce.

The Minister makes great play of the Government's "genuine partnership" with industry on this Bill. Of course consultation is essential, but this is not all one-way traffic. I have already mentioned IR35. Moreover, no less a body than InterForum, member companies of which have annual revenues of some £78 billion, have commented that: For the Government to reserve powers to introduce an alternative scheme at any time undermines confidence and injects an element of risk into our business planning—just at the moment when we should be doing everything possible to increase our investment. Therefore, we would recommend that you remove Part I and take forward a simplified Bill". We on these Benches are sympathetic to that view.

I turn now to what is the kernel of the Bill; Part II and the admissibility of electronic signatures in law. We accept without reservation that this is both sensible and desirable. There is consensus about that on all sides of the House. It will build confidence and trust among both consumers and practitioners of e-commerce. But, as my noble friends Lady Buscombe and Lady Anelay have pointed out, it will do so only if we get the legislation right.

I was pleasantly surprised and pleased to observe that, perhaps unusually for Members of another place, their scrutiny of Part II has been characterised by sweet reason. Of course, even in this transitional House, we are much more accustomed to such an approach. On that basis, we will spend many happy hours in Committee debating some of the finer technical points at issue here.

At this stage, I simply flag up our more general anxiety about the order-making powers in Part II. We acknowledge the rationale for them and the simple fact that the Government should be seen to be giving a lead in this matter. The difficulty, as articulated by Amazon.com., is that there is no imposition of either urgency or co-ordination upon individual Ministers: each can proceed in his own sweet time and in whatever way he deems appropriate.

Ironically, this is a particular concern of none other than the Alliance for Electronic Business, which has set the end of this year as a deadline for the tabling of the relevant statutory instruments if the growth of e-commerce in the UK is not to be compromised. Of course the Minister for Small Business and E-Commerce published the first Section 8 order in draft only last week. We welcome that and the Minister's commitment to the issue. We simply ask whether the Government are adequately seized of the possibility that some of her ministerial colleagues—perhaps of a more monolithic or (dare I say?) Luddite bent—will naturally follow the sleekness of her example.

In some respects, the Bill is as significant for what is absent from it as for the scraps and odd pieces of red meat that it contains. Key-escrow is a case in point. But in this we should be under no illusions. The measure before us today is, as it were, a first skirmish in an ongoing battle against the demons of over-exuberant regulatory burden. Other areas of the legislative mill—notably Finance Bills and the Financial Services and Markets Bill—are making their own, potentially anomalous, provisions for IT.

Echoing some of the concerns of my noble friend Lord Lucas, I note that a common position, on which the Government will no doubt seek to legislate in due course, was arrived at on the EU Directive on Certain Legal Aspects of Electronic Commerce on 7th December last. I note, too, the DTI announcement on 3rd February of the White Paper for proposals to reform telecommunications and broadcasting regulations to take account of the convergence in the communications industries as a prelude to future legislation. Other EU directives are in the pipeline. A veritable log-jam of e-commerce related measures is building up in the wings.

We also recognise that the Government are pursuing a number of initiatives away from the spotlight, if I can put it that way, of primary legislation; such as the TrustUK kitemark, referred to by the noble Baroness, Lady Dean, and my noble friend Lord Lucas, and the fact that the e-envoy has finally got his feet under the desk in the Cabinet Office. These form part of the deluge of recommendations from the PIU's report, e-commerce@itsbest, which I hope the Minister can confirm are on track. In this context, perhaps the Minister can also confirm the assessment of the Better Regulation Task Force that the 60 different initiatives that are being worked on for IT regulation could lead to 4,000 items of legislation.

Whether this flurry of activity will be beneficial in the context of e-commerce, only time will tell. Overall, we doubt it. But, as my noble friend Lady Buscombe pointed out, we on these Benches are certain of one thing; e-commerce in the UK will prosper only if government properly understand the global—not UK-wide, not European, but global—context in which it operates. That more than anything else is the key to the prosperity of UK e-commerce. I noted that last year in Cambridge the Prime Minister seemed to demand that business should "think European" in the context of IT. That is worrying because it is far too narrow a focus.

The Government's assertions for their public policy approach to IT are bold. They claim that the Bill: forms a key part of the Government's strategy for making the UK the best place in the world to do electronic business by starting the process of modernising the law and creating a climate in which electronic business can be conducted with confidence". All good and well. We hope that they are right. Indeed, Part II of this Bill is a legitimate part of that process. But we believe that Part I, and the Government's wider IT agenda, contain alarming signals about their commitment to "light touch" regulation. Bluntly, that does, and should, worry us. In the meantime, we welcome its small step/giant leap character and look forward to its Committee stage in due course.

8.40 p.m.

Lord Sainsbury of Turville

My Lords, this has been a very constructive and interesting debate. There is obviously a great deal of expertise among noble Lords here tonight. I look forward very much to detailed discussions in Committee when I am sure that I shall benefit further from the knowledge and experience of others.

I am particularly delighted that the noble Baroness, Lady Dean, and the noble Lord, Lord Evans, emphasised the opportunities involved because I believe that that is what we should keep our eyes on as we go forward with this Bill. I say to the noble Lord, Lord Razzall, that I believe it was slightly uncharitable to say, on the one hand, that he applauds the "light touch" of regulation, and, on the other, to say that it is a meagre Bill. One can have it one way or the other, but I do not believe that one should try to have it both ways. I believe that we can all agree tonight that the extraordinary achievements of the IT industry are based on market enterprise at its very best. I believe that that is common ground.

I shall try to respond in a moment to some of the detailed points raised during the debate, but first I should like to elaborate on one or two of the remarks which I made in opening it. This Bill, appropriately introduced in the parliamentary Session spanning the millennium, is central to the modernising theme of the Government's legislative programme. Modernising the law to ensure that our economy prospers in the information age is a vitally important task to which we are committed. We are equally committed to modernising government itself. I can assure the noble Lord, Lord Lucas, that we shall take a leadership role in this field. In short, we are determined to create both a legal and a business environment that makes the UK the best place in the world for electronic business.

The overall aim of the Bill is, as I said, to provide a market framework within which electronic commerce can thrive. It will build trust in the authenticity, confidentiality and security of online transactions. Such trust is vital if businesses and the public are to have confidence to use the new exciting technologies entering the marketplace. But government alone cannot build that trust. The task is as much for business, which is why we are so keen on co-regulation. But we need to legislate to create the right legal framework. I totally agree with the noble Lord, Lord St John of Bletso, that although we need to look at the opportunities, we must also stress very clearly that there are major security issues which need to be tackled.

If individuals and businesses do not trust electronic communications, they will be reluctant to order goods and services online and to send their credit card details over the Internet. That is why electronic signature services and confidentiality services are so important to the future of electronic commerce. But how do we decide which service providers we can trust and those which perhaps have failed to invest in the expertise and technology which such services demand? That is where a "kitemark" scheme is so important.

I am delighted that the Opposition have acknowledged the extent to which technology has moved in the past few years and that that is a good reason for them to modify the position that they held when this Bill was conceived, which was to have an essentially mandatory approach to the registration of cryptographic services and a mandatory placement of the keys. The Opposition now agree with us that a voluntary approach is a better one.

We have discussed in some detail the merits of self-regulation over a statutory approvals scheme. The Government's preference is for self-regulation, which is well known, as is our involvement in the development of the Alliance for Electronic Business's T Scheme. We are confident that this scheme can deliver. But we should be foolish to assume that its success is guaranteed. The market is immature and we cannot predict the future, much as we might wish to do so. It is therefore only right that we keep the possibility of introducing a statutory scheme in reserve. We are confident that the T Scheme will succeed, but I do not agree with the noble Earl, Lord Northesk, that it would be right to give up that power.

The Government recognise the degree of parliamentary interest, both in this House and in another place, in the procedure which would apply if this part of the Bill were brought into force. We have listened carefully to the arguments and have carefully considered the recommendations of the Delegated Powers and Deregulation Committee. As I have already outlined, we shall bring forward amendments in Committee to make the commencement of this part of the Bill subject to the affirmative procedure. Both Houses will have the opportunity to debate the issues and to vote on the decision.

I say to the noble Earl, Lord Liverpool, that the Bill is technology neutral. In that sense, the extent to which technology develops in this period, before any sunset clause would come into effect, is not relevant to this particular point. Before any regulations were brought in, there would be consultation.

Part II of the Bill has been described as the "kernel". I would not argue with that description. It will clear up uncertainty about the admissibility of electronic signatures and thereby build confidence in them. It will also give Ministers the tool to modernise the statute book to enable information to be communicated or stored electronically. In doing so, it will pave the way for a revolution in the way in which government works and will modernise our relationship with the citizen. It will offer electronic options for those who want them.

I now comment on some of the particular points raised by noble Lords. I agree very much with the noble Lord, Lord Sharman, about access. That is absolutely fundamental to the process so that we do not have people who are disadvantaged in this new world. I hope that he will take particular interest in this Bill and the issues on crime which might arise, knowing of his chairmanship of the Foresight Crime Prevention Panel.

The noble Earl, Lord Erroll, raised the question of whether we should look at electronic signatures across the board. We looked at that and resolved that it would cause more uncertainty and confusion than proceeding the way we are, which is with primary legislation to make that possible, but then looking in turn at each of the areas in depth before bringing forward regulations.

A question was also raised about the definition of an electronic signature. That includes the concept of authenticity, which in turn is defined in Clause 14(2). One aspect of authenticity is whether the communication was intended to have legal effect. The courts will be able to consider whether a person who signed something electronically intended it to have legal effect. The signature will be evidence of that, although there may be other evidence which needs to be considered.

The noble Baroness, Lady Anelay, also raised a question on electronic signatures. Clause 7 is drawn widely to allow any kind of electronic signature to be admissible as evidence in court. But that does not mean that on every occasion the signature will be accepted as genuine. It is possible to get hold of someone else's electronic signature if the owner is careless, just as it is possible to forge a handwritten signature. So it will be for the courts to examine the particular case and then to decide what actually happened, on all the evidence available. I believe that that strikes the right balance.

I am glad to be able to reassure the noble Baroness, Lady Buscombe, that the definition of an electronic signature in Clause 7(2) encompasses both digital and electronic signatures. That is important to retain the overall technology neutrality of the Bill. In that context, as in others, there is no intention of second-guessing the development of the market. I should explain to the House that neither the definition contained in the Bill nor that in the Electronic Signatures Directive is restricted to personal signatures. That would restrict the scope of these measures, as not all electronic signatures are generated by individuals.

My noble friend Lady Dean raised a question about the role of notaries and the banks through IDENTRUS in the Alliance of Electronic Business's T Scheme. I understand that both the notaries and the banks are playing important roles in the alliance's work and they will be encouraged to continue to do so. I am sure that notaries can bring particular expertise to the world of e-commerce. However, I can assure the House that under the Bill there will be no new requirements for signatures to be notarised. I am also confident that the banks will be able to play an important role in both the T Scheme and IDENTRUS, the latter being essentially for bank-to-business electronic commerce.

The noble Lord, Lord Blackwell, asked about liabilities. Clearly, this is an important issue. The Bill does not make special provision for the liability of cryptographic service providers. Problems can be dealt with through the existing English law of tort and contract. A person who uses an electronic signature will normally have a contractual relationship with the service provider. If something goes wrong, he will be able to look at the terms of the contract. In some cases, the Unfair Contract Terms Act 1977 and the regulations covering unfair terms in consumer contracts limit the way in which liability for breach of contract can be excluded through exclusion clauses. Of course, the Government will not be authenticating signatures in this process, so there will be no liability for erroneous signatures.

The noble Lord, Lord Blackwell, raised two further questions. I can assure him that the Government will deliver leadership on e-commerce. As regards investigatory powers, nothing in this Bill relates to that matter. It is covered in the Regulation of Investigatory Powers Bill.

The noble Earl, Lord Liverpool, asked about low-cost signatures. I do not believe that this Bill affects their recognition in any way. While it does not exclude low-cost signatures, to the extent that people provide services which are of lower quality, that fact should be taken into account by those who use such services.

Perhaps I may assure the noble Lord, Lord Lucas, that the Bill is in line with the EU Electronic Signatures Directive. As regards the question of legislation and jurisdiction across national boundaries, it would always be nice in such areas to say that one's own legislation and jurisdiction is predominant. However, when one is selling to people in other countries, they may have a different view. The idea behind looking at this matter on a European basis is to attempt to secure unanimity on that view. Nevertheless, on the balance of rights between the producer and the consumer, this is an issue where the consumer will always view it in a different way from the producer. Obviously the producer would always wish for the jurisdiction of his country to apply, while the consumer, when he buys from another country, would prefer to use the jurisdiction of his own country. The right balance needs to be struck to give the consumer confidence, but also to ensure that costs are not loaded unnecessarily onto the producer. That is the core of this difficult issue which we are trying to resolve.

I should also say that Clause 8 only refers to situations where existing legislation refers to writing or signatures. It is then for individuals to make use of electronic signatures or not as they wish. If one takes the approach—and I think that this is the right one— of saying that electronic signatures are an option, then one needs to accept the situation that there will be some cases where individuals make use of them and some cases where they do not. I believe that that diversity is preferable to trying to impose one overall, standard policy.

As I said earlier, this has been an extremely interesting debate. I hope that I have covered the main issues that have been raised by all noble Lords who have contributed. If I have not done so, there will be many opportunities to look at these issues again in more detail as the Bill progresses through its stages.

The information age has already begun to touch on all our lives. It has the potential to transform them. We are all agreed on the need to embrace these changes. If we do not, we will find that we have been left behind both commercially and in other ways. The information revolution does not only give us the opportunity to improve the productivity of our businesses or the efficiency of government but to improve society as well: to deliver services to the public more efficiently; to improve people's access to information; to improve the education of our children and our access to medical care. It is not change for the sake of it but change for the greater good.

This Bill is a key component of our strategy for making the most of the opportunities which new technologies have offered us. It is a light-touch Bill which will help to make this country the best place in the world for electronic trading. I commend it to the House.

On Question, Bill read a second time, and committed to a Committee of the Whole House.

House adjourned at four minutes before nine o'clock.