Beware: Big Brother has an eye on your e-mail

GOING ON holiday? You might judge it sensible to leave the keys to your house with a friend - just as a precaution against fire, flood or other acts of a capricious God. But what if that friend was not what they seemed?

What if instead you learnt that your friend could give the keys to the local police to allow them to come into that house and search it; and further that you would never be the wiser, for your "friend" would be instructed not to tell you.

Bizarre though it sounds, this metaphor describes the proposals expected in a government Bill on electronic commerce, due to be published in the next few days by the Department of Trade and Industry. And British businesses are not pleased. Just when they thought they were getting consumers excited about the Internet, and were themselves discovering the possibilities of cutting costs by trading around the world over the electronic network, they have found that the Government wants, like Big Brother in George Orwell's 1984, to be able to know what they are doing at any time.

Some of the reactions to the proposal are not polite. "Idiotic" is one phrase that has been used, though publicly most are more restrained. Peter Dare, who oversees IBM's development of electronic trading systems in Europe, points out: "The Government can only regulate one country, but electronic commerce is global. You need to solve the problem at a global level."

The problem is that there is a conflict between what governments want to observe in e-commerce, and what consumers and business want to let them see.

Even home computers canencrypt messages. Consumers like that: it gives them confidence that their credit card details are not being redistributed over the Internet when they buy a bunch of roses. For business, it means not having to worry that rivals will read your e-mail.

But to a policeman intercepting an e-mail stream, does an encrypted message signal a paranoid newbie, or a paedophile? Are uncrackable e-mails between a business and a bank legitimate, or money-laundering? On Monday Paul Higdon, of Interpol's Criminal Intelligence directorate, told a conference in London that criminals' use of technology "has outpaced us". What the police want is a short cut; a quick way to crack those codes. It won't come from computers, so it must be created in law.

Battle lines are drawn, and will become clearer when the delayed draft Bill on Electronic Commerce is published, possibly later this week. The Home Office is expected to have won its fight for controls on encryption, particularly to have copies of the keys used for coding messages lodged with a licensed third party, a system known as "key escrow". With a warrant, the Government could accesskeys and decode messages.

But beyond government, the perception is that that will harm, not help, the development of an international business in which the UK is already lagging. Peter Mandelson's departure from the DTI last December dismayed many in the electronics and computing industry: they felt that he, at least, understood the importance of having the least possible regulation on electronic business. Without him to subdue the Home Office in Cabinet, key escrow looks inevitable.

The US government has already proposed and abandoned key escrow. In 1993 the Bush administration suggested anybody wanting to encrypt their phone calls would have to buy phones fitted with a "Clipper chip", which would give almost uncrackable encryption - but offer government agencies a "back door" for listening-in.

However, Clipper was shown to have myriad flaws, and besides, how many criminal masterminds would buy a phone knowing the government could tap it? Commercially, it bombed.

Thus proposals for key escrow on data communications by UK business has drawn weary sighs from those with any knowledge of history. That does not seem to include the Government. "This needs a balance between the ease of access, under lawful control, and the protection of the consumer," said Peter Bonfield, chief executive of BT, in testimony to the House of Commons Select Committee on Trade and Industry last month. "I don't think this is a technology argument."

In other words, catching fraud is not about catching criminals' messages, it is about catching criminals.

Keith Chapple, managing director of the UK arm of chipmakers Intel, added: "The French were keen to have key escrow. But they realised that it won't help law enforcement ... because one thing you are sure of is that criminals don't obey the law."