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Thursday, 22 March, 2001, 18:47 GMT
The new economy

All the parties have enthusiastically signed up to the new economy - but will the reality live up to the promises?


BACKGROUND

In common with most Western leaders, Tony Blair has made much of his commitment to the new economy.

He recently told an audience of businessmen that they faced ruin if they did not get their companies online.

He has promised to "make the UK the best place in the world for e-commerce".

And in characteristic New Labour fashion, he has even appointed an e-envoy to oversee progress towards this goal.

But Labour's attempts to regulate the internet, through the controversial RIP and Data Protection acts, have come in for severe criticism from the industry.

It has also faced criticism for allowing the rollout of high-speed internet access to become bogged down in rows over British Telecom's local monopoly. Broadband web access is seen as crucial to the development of e-commerce.


BARRIERS TO ACCESS

In theory, more consumers will log on as it becomes cheaper to access the internet.

But the development of unmetered internet access in the UK has been fraught with setbacks and delays.

Many Internet Service Providers (ISPs) offered unmetered access to the web, only to withdraw that service once they realised it was not financially viable.

They lay the blame at BT's door, who they say charges them too much for access to its local network.

Since February 2001, BT has been forced to offer ISPs access to its local network for a single flat-rate annual fee, resurrecting the prospect of more unmetered deals for consumers.

The development of broadband internet, which promises high speed 24-hour access and video streaming, transforming the way most people experience the internet, has also been fraught with difficulties.

Broadband is considered vital to the future development of e-commerce and many companies cannot develop their online business without it.


The government says it is committed to creating "the most extensive and competitive broadband market in the G7 [countries of the most industrialised nations] by 2005".

But according to figures from telecoms regulator Oftel, the UK is lagging behind the majority of Western nations in the roll-out of broadband technology.

In a report released in early 2000, Oftel estimated that by March 2001, 80,000 British net users would be using an ADSL line.

Instead the figure is likely to be nearer 40,000.

Again, much of the blame for the hold-up has been directed at former state monopoly BT, which has allegedly been reluctant to allow rival operators to install equipment in its local exchanges.

Telecom regulator Oftel has been accused of not doing enough to keep BT in line, despite being given extra powers by the government.

Meanwhile, a number of foreign operators have dropped out of the broadband race in the UK, in apparent frustration at BT's intransigence.

Meanwhile Conservative leader William Hague is to ask the Competition Commission to investigate BT's market power in local internet connections.


BRIDGING THE DIVIDE

Nearly a third of UK households are able to access the internet from home, according to latest figures.

But there are sharp differences between income groups.

Figures for the year to September 2000 show access levels of between 5% and 9% for the lowest income groups, rising sharply to 62% for households with the highest tenth of incomes.


Similarly, 71% of professionals have used the internet, compared with 33% of skilled manual workers and 28% of unskilled workers.

There are also sharp differences between the regions, with 34% of homes in London having internet access, compared to 19% in Scotland and 22% in the North-East.

Millions of people have been denied access to low cost banking and shopping on the web because they don't have a computer or don't know how to get net access.

Labour has pledged to close this 'digital divide' and is committed to providing internet access for all by 2005.

However, much of the increased access will be met through public terminals in libraries, supermarkets and community centres.

Labour has also pledged to spend 30m over three years, ensuring people in rural areas have access to broadband services.


The Liberal Democrats and the Conservatives also believe the public sector has a role in extending IT literacy.

But the Lib Dems have pointed out that Labour's promise of internet access for all schools by 2001 is meaningless if there were only one connection per school.


REGULATING THE NET

The rise of e-commerce and e-banking has prompted a proliferation of policies at international, European and national level, particularly in relation to security.

Labour has attempted to provide some protection for British companies through its Lawful Business Practice regulations, part of the Regulation of Investigatory Powers (RIP) Act.

RIP is meant to increase the security of online transactions by giving government the power to intercept emails and other communications.

But critics have called it an infringement of civil liberties and say it is likely to drive internet business off-shore.

Some economists have claimed that RIP will seriously inhibit the growth of the internet in the UK and could cost ISPs 640m over five years in compliance costs.

In the opinion of one campaign group, "the RIP Bill is the first step towards the creation of a very hostile place for network development."

Both the Liberal Democrats and the Conservatives have criticised RIP and pledged to review it.


IR35

The Tories and Lib Dems have also pledged to scrap Labour's controversial IR35 tax law, which affects thousands of freelance IT consultants.

IR35 treats specialist contractors as if they were employees for tax purposes, leading to significant increases in their tax bills.

This hits the IT and engineering sectors especially hard, because many experts prefer to work as contractors, moving between firms, rather than being tied to one employer.

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