INTERNET REGULATIONS IN THE UK

by Brian Grainger: brian@grainger1.freeserve.co.uk

The Government have been introducing a number of bills recently, which impact on how Britain will fare in the e-conomy. IR-35, (so called because it was Notice 35 from the Inland Revenue in 19xx), has caused a lot of consternation amongst contract workers. It takes effect from April 2000 and effectively means that contractors working out of their own limited companies will be liable to tax on all their earnings. Previously, they could offset some tax by taking a portion of their earnings as dividends. The government's argument is that such contractors working in the IT industry are not really self-employed, work alongside permanent employees and should therefore pay the same tax as them. This sounds fair to permanent employees, who do not have much love for contractors. What is not so obvious is that in reality such workers will actually pay MORE tax than permanent employees, because they will have to pay the additional 12.2% employers National Insurance contribution on ALL their earnings. How many permies would fancy a 12.2% pay cut! Another problem is that despite paying more taxes than the permanent employer they get none of the benefits of permanent employment, paid holidays and sick leave for example, or Job Seekers Allowance when out of work. This is before you consider the greater likelihood of being out of work. Just to rub salt in the wound the government have changed the rules so that money spent on training by such individuals is no longer tax deductible. How does this effect the e-conomy you may well ask. Well, there are a lot of contractors about (at the moment). The type of work in developing the e-conomy infrastructure is not a regular continuous operation. There is a peak of activity in putting things in place. Then the employee is not required when things are bedded in. This is the ideal situation for employing contractors. It is ironic that while on the one hand the government discourages the type of employees required they then, in the recent budget, say they are going to make it easier to employ foreign nationals because there is an IT skill shortage!

The second bill affecting the e-conomy is the 'Regulation of Investigatory Powers Bill', or RIP Bill for short. A lot of people are beginning to wish it would RIP because they believe it infringes privacy rights. The Bill has been drafted to allow, in certain instances, certain individuals to intercept communications via the Internet and to demand encryption keys if the messages are coded. The Government's view is that this is necessary to fight crime. The main criticisms of the bill are that:

• it allows surveillance of Internet traffic, which infringes civil liberties
• if asked to provide an encryption key an individual is deemed guilty of not providing it until he can prove he is innocent for some reason, such as losing the key. This is in contravention to existing principles of British Law.
• the cost on ISPs to ensure traffic can be monitored and e-mails retrieved, if required.

Charles Clarke, the Home Office Minister responsible, has encouraged people to read what the Bill actually says - rather than what commentators say it says. Have you ever tried to read a Bill? It is extremely difficult to keep ones eyes open when you try to decipher what it means. The whole business is to sustain the large fees that lawyers charge! If I was Prime Minister I would demand that all new laws drafted must have a Crystal mark for plain English. Then we MIGHT be able to read them!

Clarke also says that the Bill does not give the authorities any new powers to obtain materials which they cannot already do. It is simply a matter of shoring up existing provisions. If that were the case why is a Bill needed? Of course it gives new powers. As an example I will simply quote from the explanitory notes for the part of the Bill entitled : 'Investigation of Electronic Data Protected by Encryption etc.'
'11. This Part contains provisions to maintain the effectiveness of existing law enforcement powers in the face of increasing criminal use of encryption. Specifically, it will introduce a power to demand access to protected (encrypted) data.'
The last sentence clearly states it introduces a new power!

Finally Clarke says that accusations that the Bill reverses the burden of proof are simply wrong and that it is up to the prosecution to prove the accused was in possession of the key. I would like to quote from Paragraph 49 of the Bill, (please keep awake!):

49.-	(1)	A person is guilty of an offence if-
		(a) he fails to comply, in accordance with any section 46 notice, with any requirement of that notice to disclose a key to protected information; and
		(b) he is a person who has or has had possession of the key.
	(2)	In proceedings against any person for an offence under this section, it shall be a defence (subject to subsection (4)) for that person to show-
		a) that the key was not in his possession after the giving of the notice and before the time by which he was required to disclose it; but ....

Note (2) states that the person (accused) has to show ...
This clearly indicates that the responsibility lies with the defence, not the prosecution and that the accused has to defend himself from the supposition of guilt!

Regarding the increased costs on ISPs there have been Government statements that they might provide some money to ISPs. However, what they will provide and whether it will cover the cost fully are questions that have not been answered clearly.

You may have heard of the RIP bill, but dismissed it as a lot of boring nonsense. How keen will you to use the Internet for mail/e-commerce if you know that all your communications are potentially being monitored. How would you like to be placed in prison for up to 2 years if you do not provide an encryption key but cannot prove you lost it? How would you like to pay more for your Internet service because the ISPs have passed their additional costs in meeting the Bill's provisions onto you.

The final Bill affecting e-commerce became law recently. That is the new Data Protection Act. The new laws provide protection against information on individuals, whether it is held electronically or on paper, being misused, passed on to third parties or held when it is incorrect. The aims are very laudable. My main gripe is that the organisations of government seem to be exempt! Did you know, for example, that the Inland Revenue have requested loyalty card data from supermarkets? Because they wrap it up in the principle of preventing tax evasion this transfer of data to a third party is exempt from the Data Protection law! Personally, as someone who pays my taxes, I do not see what relevance my shopping habits are to the Inland revenue. Anyway, this is not really relevant to e-commerce. One of the provisions of the new Act is that data must not be passed to countries that do not have laws equivalent to our own, (well Europe's really since it was they who instigated the drafting of the new Act). Well, the good old USA do not have data protection laws but rely on self regulation. There has been much talk between the EU and the USA to try and resolve this problem and recently there is hope a compromise may have been reached. I hope so. Can you imagine the effect on e-commerce if suddenly companies in the USA will not deal with Brits because they cannot comply with our data protection laws. Quite why the EU thinks it can regulate what other countries do is beyond me.

In discussing the Bills above I have tried to highlight the negative effects on e-commerce that UK and EU governments legislation is having. Our beloved leader may want Britain to be the leader of e-commerce. It is a pity the actions of his government actually hinder this objective.

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