UPDATED: The Conservative Party has put forward proposals to reform the Data Protection Act to end what it calls "the huge regulatory burden" it places on businesses. But the figures used to justify the changes have been criticised for being almost 10 years old.
A legal expert has called the figures "unreliable" and also claims it is "unrealistic" to blame the Act for all compliance costs in this area.
The Conservative Party's red tape review is titled 'Freeing Britain to Compete: Equipping the UK for Globalisation.' It is published as an official submission to the Shadow Cabinet by the party's Economic Competiveness Policy Group, which is chaired by John Redwood MP.
Under demands for the Data Protection Act to be reformed, the policy review quotes figures from the British Chambers of Commerce "Burdens Barometer", and estimates that the Act imposes a recurring annual cost of £2.3 billion for both the public and private sectors. The Burdens Barometer quotes £667 million as the recurring annual data protection costs for business alone, and the £2.3 billion figure is derived by adding in other costs from a Regulatory Impact Assessment (RIA), published by the government, when the Data Protection Bill was before Parliament in 1998.
The policy review states that this is the third-highest impact of all the new regulations on business legislated in the last 10 years.
However, the policy group report seems to have ignored a much more recent study published in December 2006 by the former Department for Constitutional Affairs. This later study measured the costs to businesses of complying with the Data Protection Act and associated secondary legislation at a much lower £55.9 million in recurring annual administrative costs – 12 times less that the Burdens Barometer figure of £667 million. This latest estimate did, however, carry an accompanying warning that it should be regarded as "indicative" and might not be "statistically robust".
The Conservative's policy review concludes: "The Data Protection Act implements EU law in the UK, and we are increasingly concerned about how governments and large organisations use their personal data.
"Nonetheless, we strongly suspect that it would be possible to reform the Act in order to reduce its burden.
"Proper handling of the data given to public bodies and private sector companies would be governed by the general law of privacy, and by established codes of conduct."
Louise Townsend, a data protection specialist with Pinsent Masons, the law firm behind OUT-LAW.COM, said it was questionable why the Tory policy review group had decided to ignore the most recent compliance cost estimate.
"It is, at best, dubious how they get to such a high figure for the annual cost to businesses of the Data Protection Act," she said. "It seems they may be using an inflated or out of date figure to justify their demands to reform the legislation. There certainly seems to be some doubt about the validity of their figures."
Townsend added: "It is also unrealistic to blame the Data Protection Act for all the compliance costs to businesses in the data protection area, as most commercial organisations have to take security and data quality measures to meet their own industry standards and good commercial practice."
Townsend said there might be scope for amendments to the existing legislation which would still comply with the European directive. "It might be possible, but it could prove quite difficult to achieve," she said. "Other measures suggested by the report such as cost benefit assessments and consultation with industry bodies before new guidance is introduced may be more realistic."
The Conservative Party did not answer OUT-LAW's request to clarify why it had not based its cost estimates on the most recent figures available.
Editor's note 22/08/2007: This story has been updated since it first appeared. Following comments from readers, we have revised the text to explain the source of the various costings cited.