Last Thursday, scientists, civil liberties advocates and business were anxiously expecting an official statement, but Department of Trade and Industry (DTI) officials delayed the announcement and are still refusing to specify a new date for the policy's publication.

Encryption is the technology used to protect information sent over the Internet. (Click here to find out more about encryption!)

Leaks posted to Internet news groups alleged that the government wants to implement a so-called key-escrow policy, which would require that all individuals and companies store the keys to their encryption code with a neutral third party that would in turn give law enforcement agencies access if a crime were suspected.

Nigel Hickson, the head of information security policy group at DTI, was quoted as saying on Thursday that the delay was due to a number of factors, including "completely wrong announcements on the Internet."

However, the DTI denies that he made such a statement and says the postponement of the announcement has nothing to do with rumours on the Net.

A DTI spokesman told the BBC that "things are posted on the Internet all the time. The reason the announcement was postponed is because it is a very complex issue and we want to get it right."

Nevertheless, speculation is rife that the overwhelming opposition to encryption regulations from the business, civil liberties and technology communities have forced the DTI to re-consider its policy.

Balancing conflicting demands

• Background: The great encryption debate
• Security and law enforcement: the government view
• Digital freedom: the case for civil liberties on the Net

Jack Straw wants to give the police access to Internet codes

"There is no fundamental difference between an encrypted file and a locked safe," the manifesto stated.

But in January, the Home Secretary, Jack Straw, agreed with other EU justice ministers to consider a key-escrow policy, which would allow law enforcement agencies access to the computer codes used to scramble information.

The ministers believe such access is necessary to crack down on organised crime that may use the Internet to conduct their activities in secret.

Why the reversal?

Encryption regulations certainly will not win the government many friends. Civil liberties advocates and many companies resolutely oppose the plan, saying it is unworkable, an infringement on individual privacy and destined to stunt the growth of electronic commerce.

In addition, the Organisation for Economic Co-operation and Development and an expert panel preparing a report for the European Commission have condemned the encryption regulations.

The explanation for the change of heart lies in the gap between business and technology priorities and those of law enforcement. Although encryption policy formally lies within the jurisdiction of the Department of Trade and Industry, many believe DTI officials are under pressure from the Home Office, which in turn is under pressure from US security officials.

The United States firmly believes that key-recovery policy is necessary to stop the criminals of the information age. In various statements, US officials have said that there is widespread international support for such a policy. Now, encryption experts say, they are trying to make sure that is the case.

Techies take action

Civil liberties organisations are campaigning to stop regulation

Although the policy is still under wraps, some groups have already begun to mount a counterattack.

"We're trying to create a knee-jerk reaction," said Danny O'Brien, publisher of the online technology newsletter, Need To Know. "Unlike in the United States, there isn't the perception that government is out to get you. It is easy for them to pitch key escrow as a law-and-order measure, especially in a country under terrorist threat."

Already, many pro-encryption groups have spoken up against any regulation. One of them is the Global Internet Liberty Campaign, a group of human rights, civil liberties, and Internet advocacy organisations, which issued a critical statement of encryption regulations. It argued that a key-escrow policy could help criminals, rather than prevent crime,

The lobby group, Scientists for Labour, also condemned encryption regulation. At their recent annual meeting, the group issued an emergency resolution saying that regulation would damage the information economy, disproportionately prejudice freedom of expression and privacy and would not be effective in combating serious crime.