Privacy campaigners have raised concerns that, if approved in its current form, the Communications Data Bill would leave UK citizens open to extortion and blackmail.
Dubbed the "Snooper's Charter", the Bill will provide law enforcement agencies, such as GCHQ, with access to communications data to help detect criminal activity.
For many years, communications data from landline telephones and mobiles has been used to catch criminals.
A draft version of the Bill was published yesterday, with Home Secretary Theresa May hailing the move as an important next step in the ongoing fight against serious crime.
"For many years our police and security and intelligence agencies have used communications data from landline telephones and mobiles to catch criminals," said May in introduction of the Bill.
"But the ability of the police and others to use this vital tool is disappearing because communications data from new technologies is less available and often harder to access."
Without urgent action, May claims this could lead to "crimes enabled by the internet" going undetected, which could put UK citizens in danger.
"No responsible Government could allow such a situation to develop unaddressed," she added.
The Bill's content was debated by privacy campaigners and MPs during an event at the Houses of Parliament yesterday.
Speaking at the event, Eric King, head of research at campaign group Privacy International, warned the proposals would put the "nation's internet under surveillance," as companies will be forced to retain data massive amounts of data about their customers.
"[The Government] is saying they want everything you've got and, if you can't, we'll give you the tools," said King.
"We think this will include black boxes...that will intercept every single packet...because there is no way any of this will work without intercepting every packet."
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