Ministers are “putting their heads in the sand” over online crime and personal data security, peers from the House of Lords science and technology committee have warned.

The warning comes after the government rejected a series of recommendations made by the committee following its inquiry into personal internet security.

Key recommendations included introducing a data security breach notification law, putting incentives in place to encourage businesses that trade online to beef up data security and creating a central government group to record and classify e-crime.

In its response, the government said the moves to introduced data security breach notification laws elsewhere in the world were “an interesting development”, but added: “We are, however, clearly not so convinced as the committee that this would immediately lead to an improvement in performance by business in regard to protecting personal information and we do not see that it would have any significant impact on other elements of personal internet safety.”

The effects of US breach notification laws had not yet been fully analysed, but there was “a strong body of opinion that doubts whether there has been significant differences to corporate behaviour. [The law] may, in fact, have desensitised consumers to security issues and undermined confidence in the internet as a business medium”, the government said.

Ministers did not see the need for a classification system to record e-crimes because “prosecution should be based on the offence, and not on the tools used in committing that offence”, it added.

The government also rejected the committee’s call for it to urgently examine the effectiveness of the Information Commissioner’s Office in enforcing data protection standards by businesses, saying the current regime was ”fit for purpose”.

Members of the committee hit back at the government’s response. The Earl of Erroll said: “The Government's response is a huge disappointment. The Internet relies on the confidence of millions of users, and that confidence is in danger of being undermined unless we can reverse the trends that our witnesses told us about.”

He added: “We don't know quite how bad things have become today - there are no reliable figures for e-crime. We recommended that the government set up a group to develop a scheme for recording all forms of e-crime. The reply just says that the government 'do not see that there is a need' for this. If you have no idea of the scale of the problem, how can you design solutions?”

The committee had tried to look ahead 10 years to take account of emerging risks, he said. “Unfortunately, the Government dismissed every recommendation out of hand, and their approach seems to solely consist of putting their head in the sand.”