Plans to introduce a "Snooper's Charter" have received a wave of criticism, with MPs, public bodies and even the deputy Prime Minister attacking the Draft Communications Data Bill.
A Joint Select Committee rejected initial plans to allow law enforcement agencies to access currently obtainable data such as in email communications, with proposed powers to monitor online data scaled back.
The scope of plans to monitor data should be significantly decreased, committee chair Lord Blencathra said, with major changes required to the Bill.
"There needs to be some substantial re-writing of the Bill before it is brought before Parliament as 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," Blencathra said.
The Lord added that there is "a fine but crucial line" between giving law enforcement and security agencies access to the information necessary for national security, and allowing UK citizens to go about their daily business "without a fear, however unjustified, that the state is monitoring their every move".
Home Secretary Theresa May previously put forward plans which she claimed would protect against terrorism, for example, handing police and other agencies improved powers to monitor electronic communications. However, the committee argued that May should not be given "carte blanche" to order the retention of all types of data. The committee also rejected claims that it is necessary to put in stricter measures to ensure that plans are 'future proofed'.
According to the committee recommendations, the types of data that are accessible should be reduced, with MPs able to vote on whether service providers should have to collect IP address data from subscribers for example. The number of public bodies able to access the data should lowered, the committee recommended.
In addition, MPs said that there should be more consultation with privacy groups to avoid the gung-ho approach that has drawn widespread criticism from external bodies.
However, the committee indicated that it would be happy to pass proposals if they are changed to meet the recommendations.
The plans also received criticism from deputy PM Nick Clegg, who said that plans to increase powers to monitor online communications need to go "back to the drawing board".
"It is for those reasons that I believe the coalition Government needs to have a fundamental rethink about this legislation," Clegg said. "We cannot proceed with this bill and we have to go back to the drawing board."
The Information Commissioner Christopher Graham also took aim at the recommendations, highlighting the problems it would cause in regulating the strict rules initially proposed by the government. Withholding more data, and for longer periods of time would also be a drain on public finances, Graham said.
"My concern is around the adequacy of the proposed safeguards that the ICO would be responsible for regulating," Graham said.
"Ensuring the security of retained personal information and its destruction after 12 months would require increased powers and resources, and as it stands today we've not been given clear advice on where that will come from," he said.
The Home Secretary defended the bill in a newspaper column today, stating that she is "determined" to see through the web monitoring plans.
Nick Pickles, director of privacy and civil liberties campaign group Big Brother Watch, told TechEye:
"The committee has exposed weak evidence, misleading statements and fanciful figures and unanimously rejected this draft Bill's proposal to monitor everyone's emails, web visits and social media messages.
"The complexity and sensitivity of the subject required a radically different process and a totally different bill. There are challenges, but they can be solved in a proportionate way that protects privacy, is based on what is technically possible and focuses on maximising the effectiveness of data already held.
"After such a damming report, Parliament cannot support the draft Bill and it is now essential that if proposals are brought forward, they are comprehensively re-written and based upon the clear evidence and proper consultation that this draft Bill fundamentally lacked."