In a critical report, the MPs said the government and industry have a "laissez-faire" approach to online crime that could lead to an "economically disastrous" loss of public confidence in the Internet.

With computer fraud growing more sophisticated, people have little hope of protecting themselves alone, the House of Lords' Science and Technology Committee said.

"You can't just rely on individuals to take responsibility for their own security," said committee Chairman Lord Broers. "They will always be outfoxed by the bad guys."

Cybercrime is one of the fastest growing criminal activities, not just in Britain, and includes a huge range of illegal activity including financial scams, computer hacking, downloading pornographic images, virus attacks, stalking by e-mail and creating websites that promote racial hatred.

The lawmakers said that industry - from software makers and Internet service providers to banks and shops - must do far more to protect customers.

And they criticised the government for insisting that responsibility for security rests with Internet users, who are often faced with a "bewildering" set of options.

"This is no longer realistic, and compounds the perception that the Internet is a lawless 'Wild West'," the report said.

The government must work with the European Union to see if more responsibility for security could be legally handed to computer and software makers, the report said.

A network of police computer laboratories should be set up to fight the "flourishing" online crime industry.

Senior police must get the extra funds needed to launch a central e-crime unit and a Web site where people could report online offences.

The report also highlighted the lack of clear figures on e-crime. The government should also make sure the courts are aware of the seriousness of the problem.

"The choice is either to intervene now¡­to keep the threat to the Internet under control, or to let it grow unchecked, and risk an economically disastrous, long-term loss of public confidence in the Internet," the report concluded.