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7.59 pm

The Minister for Energy, E-Commerce and Postal Services (Mr. Stephen Timms): I congratulate my hon. Friend the Member for West Bromwich, East (Mr. Watson) on securing the debate and introducing this important subject. I pay tribute to him for engaging a large part of the technology community worldwide with the business of the House through his remarkable and widely renowned weblog.

My hon. Friend rightly referred to the scale of retail crime—over £2 billion in 2002. The British Retail Consortium annual retail crime survey, to which he referred, tells us that some 300,000 customer thefts accounted for 44 per cent. of that, staff theft accounted for 37 per cent., and a variety of kinds of fraud accounted for the balance.

The subject that my hon. Friend has raised is important, and we are working closely with the retail sector and others to tackle it. I want to take the limited time that I have to highlight some of the activities that we have in hand in this area.

The business-led retail strategy group announced by my right hon. Friend the Secretary of State at the British Retail Consortium in October 2002 has identified crime as one of the five key issues for the sector and recognised the role that technology can play in reducing it. There is a host of local and national initiatives. My Department is responsible for the management of information—MI—and next wave programmes. The Home Office has led a number of programmes, including the highly successful chipping of goods programme, which my hon. Friend mentioned.

The MI programme was established in 1998 in response to the Foresight-initiated fraud liaison awareness and research exploration project, which showed a strong interest in combating retail fraud in a collaborative way. That project has a budget of £7.8 million from public sources, including the Department of Trade and Industry, the Home Office and others, matched with equal funding from the private sector. There have been three calls for proposals under that programme and a total of 15 projects. It addresses fraud prevention, privacy and security, principally in the retail sector, using a variety of technologies. One project,

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which my hon. Friend mentioned, the business information crime system, has attracted particular attention and is being evaluated.

The Home Office launched the chipping of goods initiative in March 2000 to show how property crime could be reduced throughout the retail supply chain using the radio frequency identification technology that my hon. Friend has spoken about. A range of stakeholders are involved in that initiative. As he said, £5.5 million of Government funding has been more than matched by investment from other partners to establish eight world-class demonstrator projects, showing the effectiveness of chipping in combating crime. It is widely expected that that technology can help in assessing whether goods have been stolen, providing proof of ownership of goods and providing an audit trail to show where goods have been and who was involved in handling them during their life cycle.

In technological terms, the initiative has been a resounding success. Given a little more time, I could tell my hon. Friend about a number of projects that have been taken forward under that initiative, including several that he mentioned, such as that advanced jointly by Unilever and Safeway. The British Marine Federation has worked on a boat identity scheme based on RFID. TRI-MEX International is working with Nokia and DHL to combat mobile phone theft. Argos is working in conjunction with Integrated Product Intelligence on a system to track and trace jewellery. Woolworth's, EMI Distribution, Dell Computers and others have been involved. That initiative is now closed, but the Home Office and DTI are working to ensure that the best practice that has been identified is made available to the wider retail and supply community through business support networks.

The next wave programme is a DTI initiative that seeks to advance pervasive computing—an environment in which billions of programmable or pre-programmed devices are around us in a networked environment. The areas potentially affected are vast, and clearly the monitoring and tracking of assets, RFID and other services in the retail and transport sectors could be a very important part of that programme. Activities are organised into virtual centres, one of which caters for information on the move and is hosted by IPI Ltd. "Project Inform" within it is based on an intelligent shelf—my hon. Friend mentioned Tesco tagging razors, but this is a slightly different initiative involving DVDs. "Project Fabric" within the programme has been testing the feasibility of individual garments being equipped with a unique electronic identity.

The Massachusetts Institute of Technology Auto-ID centre has prompted much speculation about where "the internet of things" is taking us. It envisages a world in which all products carry an RFID tag, uniquely identifying the item. The tags will contain an electronic pointer to a server where data on the item and its history captured during its manufacture and distribution can be accessed. Immediate information of any item's location and condition would be useful to businesses in supply chains and retail, but that raises the question whether tags should remain active outside the supply chain.

In theory, it would be possible for a suitably equipped individual or agency to identify any item anywhere on the planet, which raises a host of privacy issues. It is

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worth making the point, however, that read ranges are limited to a few metres and even in the light of possible future enhancements, there are some tight restrictions.

We are probably at least two decades away from anything resembling that "internet of things". Current technology cannot do it: it does not have the necessary network coverage or the capacity, and we do not have the capacity to process the information that might arise from it. RFID tags are falling in price to the extent that item-level tagging is becoming a possibility, but it would have to be an order of magnitude cheaper to make a convincing business case. A tag costing a penny, which has not yet been achieved, on a DVD worth £10 makes some sense, but not on a can of beans costing 30p.

Some have argued that there may never be a business case for using electronic product code technology on commoditised retail items, but EPC is being developed into a standard and is the basis for systems being specified by the US Department of Defence, WalMart and Tesco. It continues to raise questions and to fuel speculation. What the recent speculation has done is to identify the perceived risks to civil liberties from wider use of RFID, particularly relating to intrusive selling techniques and privacy issues.

Those issues are under discussion between the Department of Trade and Industry, the Home Office, the Department for Constitutional Affairs, and various industry forums. The National Consumer Council is hosting a forum on the use of RFID technology in February. My Department will be represented, as it is important for us to understand and address the perceived risks if business is to benefit from the improved productivity and supply chain efficiency potentially available and, indeed, the reduced levels of crime.

Best practice examples are already emerging in the introduction of new technologies. Marks and Spencer, to which my hon. Friend referred, went to great lengths to explain to staff and customers what the trial of RFID tags on garments was about. All the tags were clearly identified and removed at the point of sale. Where the tag was attached to a wrapped item, customers were offered an alternative bag before leaving the premises. The tags could be read only with a Marks and Spencer reader.

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Marks and Spencer also met with Consumers against Supermarket Privacy Invasion—the pressure group that my hon. Friend mentioned—to explain what it was doing. CASPIAN remains fundamentally opposed to the technology, but I understand that it was satisfied at least with Marks and Spencer's intentions on the initiative. The M&S approach worked well in comparison with the experience of other retailers such as WalMart, Proctor and Gamble, Prada and Benetton, where less well-communicated objectives resulted in lost customer confidence and, in some cases, protests.

No one, least of all in retailing, wants negative responses from customers. That affords some confidence that retailers will not want to risk giving rise to the sort of fears that my hon. Friend mentioned. There has been one protest here, against the "Inform" project at Tesco. It was attended by four people—three adults and a child—suggesting that the great majority of customers recognise that the technology is being used to improve stock management rather than something more nefarious.

Some individuals object to the wider use of IT in principle. More constructively, Liberty is intelligently articulating the civil rights issues and is already airing them in industry forums and with the Government. I welcome such intervention, as we all need to address the concerns, as we have done with other technologies. Not to do so would deprive businesses of the means significantly to improve efficiency for themselves, improve choice and availability for customers and reduce crime and the opportunity for crime.

We will continue to foster links between retailers, technology providers and the science base. The UK has strengths in technology and it is no coincidence that the intellectual property from MIT's Auto-ID centre has been assigned to the UK-based e-centre for commercialisation. We will continue to support the development of innovative technologies that address crime, reduce the threat of crime and promote competitiveness and productivity. We will also help cultivate and capture best practice and ensure that it is widely disseminated. That will benefit both business and citizens, and position the UK favourably—

The motion having been made after Seven o'clock, and the debate having continued for half an hour, Mr. Deputy Speaker adjourned the House without Question put, pursuant to the Standing Order.

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