Internet providers will be required to give access to communications in real time to GCHQ.
In planned legislation, this will allow the government to be able to monitor the calls, emails, texts and website visits of everyone in the UK.
The new powers are expected to be announced in the Queen's Speech in May and would not allow GCHQ to access the content of emails, calls or messages without a warrant, according to BBC News. Any new law would have to make it through Parliament potentially in the face of opposition in both the Commons and the Lords.
The plan has caused outrage among civil-liberty groups, with Big Brother Watch calling it "an unprecedented step that will see Britain adopt the same kind of surveillance seen in China and Iran".
Shami Chakrabarti, director of Liberty, told BBC News that this was "more ambitious than anything that has been done before" and was "a pretty drastic step in a democracy".
Jim Killock, executive director of the Open Rights Group, said: “Of course the security services should be able to get a warrant to monitor genuine suspects, but blanket collection, without suspicion, or powers to compel companies to hand over data on the say-so of a police officer would be very wrong.
“The saga of [alleged] complicity between senior police officers and Murdoch's journalists should tell us how vulnerable people's privacy can be. The government should stand by the commitments both [coalition] parties made before the election to protect our privacy.”
A Home Office statement said: “It is vital that police and security services are able to obtain communications data in certain circumstances to investigate serious crime and terrorism and to protect the public.
“As set out in the Strategic Defence and Security Review, we will legislate as soon as parliamentary time allows to ensure that the use of communications data is compatible with the government's approach to civil liberties.”
Rik Ferguson, director of security research and communication at Trend Micro, originally blogged on the topic in February, when he mentioned that a planned implementation of the EU directive on data retention among ISPs from 2009 was eventually shelved due to a lack of public support.
He said: “The Home Office insists that this information is vital for fighting crime and terrorism; but is this legislation really going to be effective against the people at whom it is supposedly aimed?
"If national governments and law enforcement organisations truly believe that online criminals and international terrorists don't know how to hide their online traces, then we have a bigger problem than we thought (sending an encrypted email with spoofed sender address from an internet café is only lesson one).”
Talking to SC Magazine, Ferguson said that this was "less a slippery slope and more a vertical drop off a cliff", pointing to how easily the Regulation of Investigatory Powers Act 2000 was abused for freedom of information.
He said: “You also have to look at the budget for the new UK Cyber Crime Strategy and balance it against the cost of this and consider what the volume of data will be, not to mention the storage and implementation of technology across various places.
“My personal view is that finance could be better allocated, and if we want to take cyber crime seriously, we have got to take spending on capabilities seriously. If you have concerns you have got to talk to your MP and make your views known. What is important is that we have no idea what the details of this will be.”