BRITAIN is losing the war against internet crime, an influential group of MPs has warned.

One estimate of its cost to the UK is £1.8bn a year, or £144 per victim.

Despite being the pre-ferred target of online criminals in 25 countries, Britain was still "complacent" towards e-crime as victims are "hidden in cyberspace", the Commons Home Affairs Committee said in a hard-hitting report today.

It argued there was insufficient funding and resources for tackling online crime, which includes identity theft, industrial espionage, credit card fraud and child exploitation.

Tougher sentences for online criminals and improved training for police officers are recommended by the committee to deal with the growing e-crime threat.

"We are not winning the war on online criminal activity," said Labour's Keith Vaz, the committee chairman. "The threat of a cyber attack to the UK is so serious it is marked as a higher threat than a nuclear attack."

He pointed out that someone could steal more on the internet than by robbing a bank and online criminals in 25 countries had chosen the UK as their number one target.

Detective Chief Superintendent Charlie McMurdie, head of the Police Central e-Crime Unit, told the MPs that e-crime sentences were too lenient, with hackers who cost Paypal more than £3.5m given sentences of seven to 18 months.

The committee also called for a service similar to anti-online child abuse group Internet Watch Foundation to be formed for tackling the spread of terrorist material online.

"Young people are increasingly radicalised online by the words of radical clerics such as Anwar al-Awlaki on YouTube or internet magazine Inspire.

"What starts on the web, ends up on the streets of Woolwich," warned Mr Vaz.