The Communications Data Bill would force telecoms companies to retain for a year records of all phone and email traffic and website visits, though not the content of calls and messages.
Home Secretary Theresa May has called the proposals "sensible and limited" measures to prevent crime and terrorism.
But an all-party committee scrutinizing the legislation said Tuesday that the draft bill was "overkill and much wider than the specific needs identified by the law enforcement agencies."
The proposals have split Britain's coalition government. Deputy Prime Minister Nick Clegg, leader of junior partner the Liberal Democrats, said the law required a "fundamental rethink."
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