Inland Revenue’s Loss of Data Confirms Worldwide Lack of Privacy


I do not think that the Inland Revenue’s loss of records which cover 25 million people will prove to be a local incident, of importance only in Britain. It certainly is important in Britain, where it has shaken Gordon Brown’s Labour administration, but it shows a fault line in the modern world.

All administrative systems now depend on the electronic storage of data. The whole of the global financial system has shifted from paper to computer held data. Investment has become a virtual business. Investment funds do not hold pieces of paper, but computer records. Bankers transfer huge sums of money by computer. Politicians fight elections by seeking out the data of marginal voters. Wars depend on “smart” – that is computer controlled – weapons. The medical records of millions of patients are held in computer banks. It is hard nowadays to find a human activity which is not dependent on an electronic system at some point. I am writing this in the old fashioned way, with a pen on a piece of yellow paper such as is used by American lawyers. That, however, is because I enjoy writing in that way and believe that I write better sentences with a pen than I do on a keyboard. Obviously everyone who reads what I am writing will do so by an electronic link.

The reason that the Inland Revenue’s loss of two CDs, with 25 million names and personal data on them, is so important is that it shows the extreme vulnerability of the whole system. In 1934, Stanley Baldwin, then Britain’s Prime Minister, said of an earlier new technology, “the bomber will always get through.” In the Second World War, the bomber did get through, first of all in attacking London, but eventually in attacking Hiroshima. The weapons become more powerful.

We can now say that the hacker will always get through. There is no such thing as a completely secure computer system. If a message is absolutely impossible to decode it is no use to anybody. At least the intended recipient must be able to decode it, and if the recipient can, some unwelcome intruder will also be able to do so.

Most people have reacted to this situation by assuming that all channels are open, like the E-mail. Yet we all forget from time to time that there is no longer any such thing as a totally confidential message. We say indiscreet things on open telephone lines. We put bank statements in the wastepaper basket and expose ourselves to having our identity – or at least our bank account, stolen.

Privacy and confidentiality are, however, important concepts. Nobody wants to lose medical or legal privacy. Yet modem systems of holding medical records cannot be private. The theoretical ideal of the British National Health Service is that all records should be transferable from one doctor to another or from one hospital to another. That would mean, if achieved in full, that about one million people working in the Health Service would need to have access to the medical files of about 60 million people. It might be possible to prevent the police having automatic access, but I doubt if it would be. In the United States there is no National Health Service but insurance systems can cover up to 10 million people. Once there is a data system with multiple access, privacy is at an end.

Yet this allows everyone, with a little determination, to access all private information. One’s blood pressure and bank account might just as well be on Google. Private detectives, criminals, governments, can now know far more about us than we would wish. Identity theft is only one of the risks. The question that arises is whether one can run a society successfully without any principle of confidentiality. The British Inland Revenue blunder has demonstrated that confidentiality can never be guaranteed.

William Rees-Mogg
for The Daily Reckoning Australia

William Rees-Mogg
Leading political editor William Rees-Mogg is former editor-in-chief for The Times and a member of the House of Lords. He has been credited with accurately forecasting glasnost and the fall of the Berlin Wall – as well as the 1987 crash. His political commentary appears in The Times every Monday. His financial insights can only be found in the Fleet Street Letter, the UK's longest-running investment newsletter.

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