After pressure from the industry and MPs, Trade Minister Michael Wills announced that the government's forthcoming electronic commerce bill will not include a central element designed to boost security and cut out fraud.

Michael Wills: government has dropped key provision

The key escrow provision - which would have required anyone providing a secure connection to supply details to a third party or the police - has been dropped.

The government has orginally wanted access to any encryption system used by businesses to send information securely, in order to prevent fraud and to allow police monitoring of Internet criminals.

But now it says that the plan would not have provided complete security, and could have ended up inhibiting the growth of e-commerce.

The new law "should not include any requirement for mandatory storage of encryption keys," said Mr Wills.

A secure means of sending data, especially credit card information, is seen as the key to promoting Internet commerce, in order that customers feel a sense of confidence and security in each electronic transaction.

Promoting e-commerce

The government is keen to promote the growth of electronic commerce, which it says will grow to a £500bn ($800bn) global industry by 2002.

Prime Minister Tony Blair defended the decision to modify the bill as necessary if Britain is to participate fully in the electronic revolution.

"It means we have a strategy which strikes a balance between protecting society from criminals and creating the best environment in the world to do e-business," he said.

Trade Secretary Stephen Byers claimed that e-commerce in the UK was surging.

A new government report said that the UK 'had all but caught up with the US' in the ownership of computer hardware needed to drive Internet commerce, and was ahead of most of its European rivals.

The number of UK companies with Web sites had doubled, and the number using the Internet to buy and sell had tripled.

But small companies are lagging behind. Mr Byers would like 1.5m small companies to be wired to the Internet by 2002, with at least one million using it to buy and sell goods and services.

Commitment doubted

Despite the rhetoric, there is uncertainty as how committed the UK government is to promoting e-commerce.

It has still not appointed an e-commerce envoy, despite a promise to do so in November.

And there is uncertainty whether the e-commerce bill, which will be published next month, will still try to establish a voluntary licensing scheme for registering encryption systems.

Most commentators believe that, given the international nature of the Web, most regulatory issues will have to be agreed on a trans-national basis.

But the UK is not notably taking a lead in the international forums that are discussing Internet commerce.

International cooperation needed

The government's change of heart comes after it became clear that the international community was moving against heavy-handed regulation of the Internet.

In the United States, a similar key escrow plan was defeated.

The US has taken a lead in proposing to the World Trade Organisation that rules are put in place to ensure that e-commerce is free of tax.

The European Union and the Organisation for Economic Cooperation and Development are also looking at the regulation of e-commerce.