MPs and peers have warned that a draft Bill in its current form would grant the Home Secretary carte blanche to retain any and all forms of communications by members of the public.
The joint committee on the draft communications Bill concluded in a report published today that the Bill must be significantly narrowed to prevent potential abuse.
The committee said that clause one of the draft Bill, which gives the Home Secretary sweeping powers to order the retention of any kind of data by any communications service provider, must be limited and safeguards put in place.
It rejected the government's claims that it was necessary to keep clause one as wide as possible to "future-proof" the Bill.
It also suggested the inclusion of a procedure which would allow Parliament to amend the Home Secretary's powers if and when the need arose.
The number of public authorities able to access communications data and the definitions of communications data also need to be tightened, the committee said.
It argued this "would allow the security services, law enforcement agencies and a few other public authorities access to the communications data they need to protect and serve British citizens without trampling on the privacy of those citizens."
This is something the current draft Bill does not achieve, it added.
Joint committee chairman Lord Blencathra called for a "substantial re-writing of the Bill before it is brought before Parliament.
"We feel that there is a case for legislation but only if it strikes a better balance between the needs of law enforcement and other agencies and the right to privacy.
"There is a fine but crucial line between allowing our law enforcement and security agencies access to the information they need to protect the country and allowing our citizens to go about their daily business without a fear, however unjustified, that the state is monitoring their every move."
The joint committee concluded: "We are very concerned at how wide the scope of the Bill is in its current form."
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