The British government is set to back down over giving Big Brother powers to law enforcement agencies to snoop on personal and business data sent over the Internet.

The BBC's Chris Nuttall: "The government is concerned about the level of opposition"

The Prime Minister Tony Blair is reported to have told senior executives of IT companies that a proposed scheme known as key escrow is not the answer to tackling cyber criminals.

The Foundation for Information Policy Research said Mr Blair had made it clear the government would not seek to link key escrow to the licensing of new electronic certification bodies aimed at ensuring secure transactions in the booming world of electronic commerce.

Key escrow involves such bodies acting as "Trusted Third Parties" who would hold the keys to coded data sent over the Net.

Police, Customs and the intelligence services were expected to be given powers to access such keys with a warrant under the provisions of a new Electronic Commerce Bill.

But Mr Blair's comments on the eve of publication of a consultation document on the bill suggest political support for key escrow is evaporating.

Strong opposition

The proposal has been strongly opposed by business, academics and civil liberties groups as unworkable.

They say a key escrow system could be compromised and would infringe privacy rights. It would not catch criminals as they would be highly unlikely to lodge the keys to encrypted data with the Trusted Third Parties.

Business has argued the UK could lose billions of pounds if companies do not have confidence in the system and choose to go abroad for services which will help them to trade securely over the Internet.

According to sources who attended the meeting at 10 Downing Street on Thursday, the Prime Minister said it was not good enough for industry merely to say that key escrow was unworkable - it had to assist in providing alternatives.

Task force set up

The meeting, called at short notice by Downing Street in an apparent attempt to smooth the path for the consultation document, was also addressed by the Home Secretary Jack Straw, the Trade Secretary Stephen Byers and Cabinet Secretary Richard Wilson, who reinforced the seriousness with which government viewed the threat posed to law enforcement by encryption.

A task force is being set up immediately involving industry and government to examine over a three-week period technical alternatives to key escrow.

Companies at the meeting included BT, the Confederation of British Industry, ICL, Intel, Microsoft and the Post Office.

Caspar Bowden, Director of the Foundation for Information Policy Research, said: "This recognition at the highest level of Government of difficulties with the key escrow policy is unprecedented.

"We await the Consultation Paper to see exactly how the licensing conditions differ from those that have been trailed over the past few months."

Submissions on the consultation paper will be accepted until Easter.

Downing Street would only say that Mr Blair attended the breakfast meeting for about 20 minutes and spoke to company representatives. A Trade and Industry spokeswoman said that key escrow would still be a part of the consultation document.

Privacy group calls meeting underhand

Privacy International, the worldwide alliance of privacy advocates, condemned the meeting as "an underhand and contemptible tactic to derail public debate"

"The meeting was an attempt to turn major companies into stakeholders in State surveillance and to silence their criticism of the impending policy", said Privacy International's director, Simon Davies.

"This is not an policy to be decided in secret between corporations and officials. It's an issue that should involve every strand of the community".

Privacy International and the Computer Security Research Centre of the London School of Economics plans a public meeting on the issue on April 20.

"Scrambling for Safety III" will involve key experts in the e-commerce and security fields, together with representatives of business and the community.