Select Committee on Trade and Industry Eighth Report


Digital divide

49. In our July 1999 Report we devoted some space to discussion of the issue of the 'information divide'. We suggested that there was a danger that "those people without jobs which involve regular use of computers, without means of buying the equipment needed to get onto the internet at home, or who are currently unable or unwilling to use computers may miss out on the benefits which it has been predicted electronic commerce might provide". We agreed with the Government's objective to prevent the formation of a class of 'information poor', and discussed a number of policy issues in relation to the threat of an 'information divide' developing within society. We raised issues such as the skills required and the cost of access, and called for a national debate on how the universal service concept could be applied to electronic commerce.[50]

50. The Government response of October 1999 stated that the Government was "committed to creating a truly inclusive information society" and noted that addressing "e-exclusion" had been identified as one of the roles of the e-Envoy. The response listed some initiatives taken, including the IT for All centres, the proposed IT Learning Centres, the recycling of computers to "200,000 deprived families", and tax incentives to encourage companies to provide employees with computers at home.[51]

51. In oral evidence in December 2000, Patricia Hewitt admitted that "there is a very real digital divide "[52]. Policies designed to increase the take-up of Internet and other digital services may indeed have the effect of increasing the digital divide, unless active steps are taken to ensure that those excluded for whatever reason are enabled or encouraged to get connected.

52. The Government is justly proud of the global figures showing availability of Internet access in homes. In the Annual Report of September 2000 it quoted figures from the Office of National Statistics to show that in March 1999 the number of connected households was 13% and one year later 25%. This growth has continued; the ONS report of 19 December 2000 showed that by September 2000 this figure had risen to 32 %, some 7.8 million homes.

53. Disturbing trends are, however, revealed in the ONS Reports. Looking by social class at the number of adults who have accessed the Internet, the ONS shows that 71% of professionals have done so, 46% skilled non manual, 33% skilled manual but only 26% unskilled. 72% of adults accessed the Internet in their own home, 38% at work, 34% at some-one else's home and 24% at an educational institution. In looking at the differences between income groups the ONS divided the population into ten income bands; from the fifth group onwards the levels of access increased rapidly with income, up to 62% for households with the highest level of incomes; for the lower levels, the proportion with access was in all cases less than 10 per cent.

54. The digital divide is of course one facet of a far wider problem of social exclusion. There are many millions of people who have, through poverty, no hope of regular access to the Internet, some of whom may lack the basic literacy skills even if they do. Those who have the means to do so may fear that the basic costs, of up to £1 a day, will rise with excessive use, particularly by younger family members, and if forced to choose between the internet and pay TV will opt for the entertainment of the latter. The record of companies claiming to be able to provide ultra-low cost access has inspired understandable cynicism. There are said to be upwards of 4 million people without bank accounts, and a greater number without credit cards, who are effectively ruled out of the e-commerce net. The universal banking proposals now well advanced will not go as far as provision of credit cards. 1 in 12 households do not even have telephone lines.

55. This is the context in which we have to judge the Government's initiatives, apparently designed to address the availability of the hardware for poorer households, access to infrastructure where there is no commercial case for it, spreading (not only among the young) the knowledge and confidence necessary to make use of electronic communications, and seeking to ensure that there is content of some relevance to such users. Some programmes seem to be designed to make a real difference. Others are evidently a drop in the ocean; they are either pilots which seek to prove that further expenditure is justified, or futile gestures.

56. In the March 1999 Budget, the Chancellor announced the Computers Within Reach Initiative, allocating £15 million to provide low cost recycled PCs for 100,000 low-income families. Following eighteen months of discussions with computer hardware and software suppliers, contracts were signed with seven suppliers in October 2000. The Minister attributed the delay between the announcement and final establishment of the scheme to difficulties in finding partners in the private and voluntary sectors willing and able to run the project. [53] On 25 October 2000 Michael Wills, the Minister for Learning and Technology, launched the scheme in several pilot areas. The Government aims to allocate 35,000 computers to the pilot areas by 31 March 2001, with an evaluation of the scheme by the end of 2001. Each recipient has to pay £60 for a computer. Ms Hewitt told us that the £60 charge for a computer under the scheme will be one of the issues evaluated by the department.[54] Two years after the announcement that 100,000 low income families would be receiving and paying for recycled computers, it seems that only a third of that number have received them, within the last few months.

57. The Wired up Communities initiative is investing £10 million from the Capital Modernisation Fund to pilot the idea of connecting homes in disadvantaged communities to the internet. On 11 October 2000, the first pilot to the Wired Up Communities Pilot Scheme was announced. The £500,000 project intends to wire up 2,000 homes in Kensington, in Liverpool. The residents receive recycled computers under the Computers Within Reach scheme, without having to pay the £60 charge. On 16 March 2001, the Minister for Learning and Technology, announced the second phase of six further local pilots in four urban areas— in east London, east Manchester, Blackburn, and south Yorkshire — and two rural areas— Framlingham, Suffolk and Alston, Cumbria. Phase 2 of the scheme is to be operational by June/July 2001. If the Wired Up Communities programme is to prove of any value it can only be if the level of expenditure and effort needed to produce worthwhile results stands any chance of being replicated on a national scale.

58. On 11 September 2000 the Prime Minister announced the Government's commitment to the establishment of 600 UK online centres to be funded by the Capital Modernisation Fund and to provide community-based internet access and training in ICT skills. The September 2000 report provided a deadline for the establishment of these 600 centres of March 2001, and the target of the end of 2002 for the establishment of over 6000 UK online centres, including facilitating internet access for all public libraries. The Minister explained how the Government was trying to make internet access not only available, but also accessible to disadvantaged communities. She cited the example of a scheme in the West Midlands where a UK online centre has been set up inside a caravan which accompanies a travelling fair.[55] A list of the proposed centres was placed in the Library following a parliamentary question from Bob Laxton MP.[56] This shows a great diversity of provision. Some of the Centres are evidently genuinely new. Others seem to be public libraries, which are being wired up under at least one DCMS programme, the People's Network, whereby 60% of libraries are to have internet access by May 2001. Some of the "centres" sound more virtual than real. Further phases of the introduction of these centres are due through the first half of this year.

59. The PIU report 'Counter Revolution — modernising the Post Office Network" of June 2000 put forward the proposal that the Post Office network should develop initiatives to help people access and use the Internet, through Internet Learning Access Points. We referred to this in our November 2000 Report on the Post Office.[57] On 30 November 2000 a contract for pilot trials in 280 Post Offices in Leicestershire was signed with the Post Office.

60. The Government's commitment to encourage employers to provide PCs and Internet access for home use was helped by the tax breaks for employees provided with home computers by their employers. There is a parallel commitment to encourage low-cost PC leasing schemes for public sector employees, possibly reflecting the take-up by teachers of similar schemes to provide teachers with PCs for use at home. Information on existing leasing schemes for public sector employees has been collated and a summary of best practice and of existing leasing schemes was to have been circulated in mid-March. There is to be an evaluation made in the summer of 2001. The DTI do not apparently offer this scheme to their employees, but Ms Hewitt informed us that they were currently developing a purchase scheme for employees which will provide them with 'very favourable terms', and that other Departments have shown an interest in developing similar schemes.[58]

61. The development of local content is one of the specific commitments under the September 2000 document, following the finding of a recent survey that half of the respondents who were "unconnected" said that the internet was not relevant to their lives. "The PAT 15 report also cited the lack of perceived relevance of commercial online content as a major stumbling block to the success of community ICT learning centres". "Strong plans" for developing local content were supposed to be emphasised when assessing bids to run UK online centres. The Minister was not able to give very much indication of what such content involved.[59] The regular progress reports refer to a "community content development programme".

62. These initiatives and centres and development programmes do not amount to a strategy to overcome the digital divide between old and young, rich and poor, urban and rural. In the context of the scale of the digital divide, they look like woefully inadequate gestures. Millions of people are excluded, not the thousands reached so far by these initiatives. We hope that the e-Envoy will be given time to look up from the world of e-Whitehall and take a holistic view of the divide. His first priority must be to bridge that gap with a rounded strategy, based on the experience gained of the rather disparate initiatives of the past few years. We look forward to its presentation in the next Annual Report.

Education and skills

63. There are a number of targets and initiatives intended to ensure that children and young people obtain the IT skills necessary to be able to benefit from the new electronic world, both for business and pleasure —

  • the Government is committed to investing £700 million in order to improve the ICT infrastructure in schools, further and higher education. All schools are to be connected to the internet by 2002 under the National Grid for Learning programme in England; by the end of 2000, 98% of secondary schools and 86% of primary schools were connected. Computer to pupil ratios in schools have risen since 1998 from 17.6 : 1 to 12.6 : 1 in primary schools and from 8.7 : 1 to 7.9 : 1 in secondary schools.

  • 32 City Learning Centres have been established, primarily for pupils and teachers, but also as centres for lifelong learning. A list of these is in the Library.[60]

  • by 2004, 75% of 14 year olds will have achieved a high standard of basic IT skills, rising to 85% by 2007. There is to be an ICT work placement scheme for students over 16; a pilot scheme for 150 electronic engineering students is underway.

  • £230 million has been committed to improving ICT skills levels among educators. 28,000 teachers have been helped with the purchase of computers and over 140,000 teachers have registered for ICT training . A further phase of the Computers for Teachers programme is to be "rolled out" in 2001.

  • A scheme for free ICT 'taster' courses to the unemployed through the UK online employability training programme was launched in May 2000. 50,000 places were made available at over 700 training venues in England. Around 20,000 people have begun courses. The progress reports state that the evaluation of the scheme indicated that it is 'popular due to its flexible attendance arrangements and its inclusion to a wider range of eligible benefits.'

  • 80% discounts are offered for computer literacy training for those with Individual Learning Accounts.

64. There are also a number of initiatives directed at making more and better educational, cultural and training material available over the Internet, and at advising parents how best to support their children's education through the Internet.

  • Culture Online was launched on 28 September 2000, aiming to provide for free access to information on the arts and cultural heritage via the Internet. The Secretary of State stated that "The implications for schools are enormous, its potential for lifelong learning enormous."[61] In oral evidence the Minister conceded that the project had been slow in getting off the ground, in part because of the need for legislation. The showcase website is now due in December 2001, and the first phase content should appear online from 2002.[62]

  • there are pilot schemes for teaching whole courses through ICT materials, in KS (Key Stage) 3 maths, and (surprisingly) Japanese and Latin, for which contracts have been awarded. Pilots are under way in 60 schools.

  • a prospectus challenging educational content developers to work in partnership with others has been published and submissions received; a seminar in November 2000 brought together the games industry with education software producers, suggesting that the fact that the main attraction of the internet to young people and some older people is the availability of games can be a strength.

  • the Learndirect scheme funded by the University for Industry was set up across England, Wales and Northern Ireland on 25th October 2000. Over 880 centres were open at the end of 2000, offering over 500 Learndirect courses. The Learndirect helpline has had over 2.3 million callers. A searchable database of UK learning opportunities was made available at the end of 2000.

65. The speed of change in information technology is a cause of concern for schools and further and higher education centres investing in ICT equipment and programmes. In response to this, the Minister explained that as schools connect to the National Grid for Learning at higher band-widths, they will be able to receive software from the network, instead of loading it into the computers themselves. This will allow schools to buy newer software without having to update all of their computers.[63] £37 million was allocated during the current financial year to eight Regional Broadband Consortia covering 86 LEAs, and £42 million is to be allocated in the next financial year to cover all LEAs. The intention is that 20% of schools will have broadband access by 2002. The modest announcement in February 2001 on expenditure on broadband generally (see para 21 above) should assist education as well.

66. There is an impressive array of educational initiatives and efforts designed to get on top of the ICT training agenda. There remains a massive task. Some of the initiatives would repay closer study than we have given them, perhaps by other departmental select committees; being able to teach Japanese by ICT, for example, may be useful, but cannot be at the centre of the nation's educational requirements. We suspect that it is proving harder to reach older people. It would be useful to have some idea of measurable output in the next Annual Report, and to have a European perspective on the UK level of achievement, at all stages of lifelong learning.


67. We devoted considerable attention to the issue of consumer protection in our July 1999 Report. While transactions making use of a computer are in some respects no different from mail-order or telephone transactions, we noted a greater perceived risk of fraud, an absence of a physical site to which to bring complaints or seek help, and an increased likelihood of cross-border transactions. We recommended that the pending EU legislation should involve no reduction in the level of protection currently offered to UK consumers, and warned that electronic commerce might be deterred by " uncertainties as to what protection exists for consumers when things go wrong."[64] We have also had the opportunity to raise the issue with the European Commissioner responsible in February 2000, and again this year with his officials.

68. There has been much activity on these matters since we reported. Issues of the place of jurisdiction for public and private law issues have either been resolved to the UK's satisfaction or should be shortly, including the extension outside the EU of the country of origin principle. Alternative Dispute Resolution (ADR) mechanisms are starting up. The TrustUK regulatory scheme which validates codes of practice requires e-commerce codes of practice to provide access to an ADR scheme.[65] Trust UK was reported in the progress report to have approved 3 codes to date, and to be considering further applications, including the German Trusted Shops Code. The aim is to have six codes approved by March 2001. The European Extra Judicial Network (EEJ-Net) intended to help consumers access ADR schemes in other member states was launched in May 2000. The UK has now reached an agreement in principle with NACAB that it will form its national clearing-house. We understand that one or two EU states have now named their clearing houses. The target is to have the full scheme running by June 2001.[66]

69. Consumer confidence in e-commerce and awareness of consumer rights remains low. This was shown for example in an August 2000 report from the National Consumers Council. The recent BRTF report called for the DTI to provide consumers with clear and accurate information on their rights as consumers in electronic commerce. We note from the March 2001 progress report that a DTI strategy paper was circulated in November 2000 and that there was a Whitehall meeting on 7 March 2001. We would welcome the deployment of the resources of DTI's consumer division, led by the responsible Minister, to publicise the efforts being made to make the electronic marketplace at least as safe a place to buy as the real marketplace, and to consider what more needs to be done.

Advice to business

70. The Minister stated in oral evidence that she believes that the Government has a 'very important role' in drawing small businesses into electronic commerce and electronic communications.[67] There are some useful and some less useful things that Government can do to help businesses and in particular small businesses with e-commerce.

  • advice: there has been an Information Society Initiative in place for several years as a means of providing jargon-free advice on best practice, but it is admitted to have "relatively low awareness".[68] The network of 100 centres is one of the best kept secrets. The Government plans now to put more money into the relaunched service, badged as UK online for business, launched in September 2000 and including a web-enabled call centre advice service with "virtual experts".The Government aims to increase the number of advisors by the month, and to develop a diagnostic toolkit. Its plans to promote best practice on information security, through BS 7799, and for facilitating transfer of e-business expertise between businesses and sectors are both several months behind schedule;

  • cost and maintenance of equipment; the three year tax break announced in the 2000 Budget for small businesses with fewer than 50 employees, providing an entitlement to a 100% first year capital allowances for investment in ICT, was widely seen as very helpful.[69] The Minister also told us that the development of application service providers is going to be 'very important' to SMEs as a means of providing help and advice on a monthly subscription basis;

  • sectoral studies; over 20 sectoral studies have been started and 13 have been completed and published; the Minister explained that the central conclusion drawn from the studies was that the DTI needs to 'integrate e-business with our other supply chain initiatives.'[70] A best practice guide has been produced. The February 2001 White Paper Opportunity for All announced an extra £30 million for helping businesses transform themselves through the effective use of IT and an Internet mentoring initiative directed at companies seeking to make the internet their primary means of doing business.[71]

71. We know of no basis for believing that SMEs in particular have expressed a desire for the sort of services offered. There is no shortage of consultants able and willing to sell their services, especially if the Government helps their customers with the expenses. Some consultants may have the track record in business success with IT to justify the fees they charge. There are magazines full of advice on effective use of IT. Conferences abound. There is in our view a role here for the Chief Executive of the Small Business Service to examine these support programmes anew and satisfy himself and those who advise him on the Small Business Council that this is the best use of the use of the business support funds available.

Economic impact

72. We noted in our July 1999 Report that there had been speculation that the growth of electronic commerce would be detrimental to some sectors of the economy, such as commercial intermediaries who might be by-passed. We recommended research into the implications for UK employment of the growth of electronic commerce.[72] The September 1999 PIU Report called for evaluation of the net impact of electronic commerce on macro-economic performance.[73] The September 2000 Annual Report refers to work on a joint paper on the net economic impact of e-commerce, which has become commitment 25.1. The progress reports record that a paper on the new economy was to be produced by the end of December 2000, and the first Government economic impact study to be undertaken in 2002 or earlier if data becomes available. The paper has now apparently been delayed to Autumn 2001. The delay is not in itself a major problem, unless it indicates any lack of urgency in mapping the effects on the economy of electronic commerce. In the absence of an authoritative study, undertaken by those without a vested interest in boosting electronic commerce, strategies designed to increase the volume of electronic commerce run the risk of being counter-productive. We look forward to the early production of an evaluation of the net economic effect of e-commerce.

50  HC 648, part III Back

51  HC 835, page viii Back

52  Q 62 Back

53   Q 72 Back

54   Q 73 Back

55   Q 64 Back

56   HC Deb, 16 November 2000, col 756w Back

57   HC 724 of session 1999-2000 Back

58   Qq 69-71 Back

59   Qq 66-7 and Ev, p 24 Back

60   HC Deb, 16 November 2000, col 755w Back

61   Department of Culture, Media and Sport Press Release, 28 September 2000 Back

62   Q 83 Back

63   Q 79 Back

64   HC 648, paras 115-124 Back

65   See HC Deb 8 December 2000 cols 322-28. Back

66   Q 56 Back

67   Q 95 Back

68   UK Online Back

69   Q 96 Back

70   Q 98 Back

71   Cm 5052, 4.62-70 Back

72   HC 648, para 76 Back

73   HC 835, page viii Back

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