The internet is a 'wild west' where criminals operate outside the the law and users fear e-crime more than mugging, according to a House of Lords select committee.

And the government's laissez-faire attitude is 'inefficient and unrealistic', says the committee's report on personal internet security, published this morning.

'The government can put in place incentives for the private sector to up their game,' said committee chairman Lord Broers.

'And they can invest in better data protection and law enforcement.

'It’s time to act now, before it’s too late,' he said.

The report called for the Home Office to help fund the proposed new e-crime coordination unit to establish a centralised and automated system for the reporting of e-crime.

When asked if the committee recommended that the Home Office provide the entire £4.5m required to fund the unit, committee member Lord Erroll said that some funding may have to come from other sources.

'If the Home Office provide £1.5m then the rest could be found from the EU and other sources,' he said.

It also criticised the decision to allow banks to be the first point for reporting e-crime, and called for legislation to hold banks liable for personal e-crime losses.

Laws that require organisations to tell their customers when a breach has occurred were also recommended, in line with the situation in the US.

The Confederation of British Industry (CBI) supports a more joined-up approach from government, but warns against forcing firms to publish details of attacks.

'Whilst appealing on the surface, new rules such as a data security breach notification law, or increased liabilities on internet service providers and software providers, need to be treated with caution, says the CBI.