Records of all communications, including e-mails, text messages and the use of Facebook, Twitter and Skype, will kept by the company and internet service providers for at least 12 months under a scheme being drawn up by the Home Office.
Christopher Graham, the Information Commissioner, said that involving Google would be flawed after he found the company responsible for a "significant breach" of data protection rules.
The Government wants a record of all private communication after the police and security services insisted that it was essential in the fight against terrorism and organised crime.
But it has dropped Labour's proposals for a central government database and has decided that individual companies will be required to keep details of customers' internet and telephone use but not the content of calls or messages.
Mr Graham, who enforces laws protecting the use of private information, warned that any system that involved major companies holding such details would be flawed.
"The Government would have to make the case that this is justified," he said. "I would have to take a view as to the way risks have been mitigated. Anyone who thinks that storing the information with the communication service providers, rather than in a big database, solves the problem hasn't been paying attention with what's been going on with Google. My major concern is that in times of austerity people will kid themselves that this sort of thing will not matter."
Google is used for about 90 per cent of internet searches in Britain and millions of computer owners have signed up for its e-mail services. The Information Commissioner's Office ruled last week that the company broke the law when its Street View mapping service collected personal information such as e-mails and passwords from unsuspecting internet users.
Mr Graham, a former BBC journalist who was appointed Information Commissioner in June last year, said that he would be auditing Google's practices and could take the company to court or enforce a penalty of pounds 500,000 if it did not change its ways.
He said that the public had now "woken up" to issues of privacy, but that people still had to do far more to protect themselves online.
Details for the plans to intercept and collect details of telephone and internet use were buried in the Strategic Defence and Security Review. The review, published last month, said that "communications data" had played a role in every MI5 counter-terrorism operation and 95 per cent of all organised crime investigations.
It said that new regulations would ensure the database was "compatible with the Government's approach to information storage and civil liberties".
The Liberal Democrats had said before the general election that they wanted to "end the storage of internet e-mail records without good reason" and the pledge appears in the coalition agreement.
The Home Office will introduce legislation for the new programme but has not revealed details such as a timeline and costs.
Gordon Brown set out plans for an "interception modernisation programme" in February 2008 but it was shelved after concerns over its cost, privacy issues and technical feasibility.
The Information Commissioner's Office told the Government that the prevention and detection of crime was "in itself not a sufficient justification for mandating the collection of all possible communications data on all subscribers by all communication service providers". Mr Graham said that the concerns raised about the original plans "remain very valid".
Google said that it had apologised for the breaches with its Street View service and had tightened up its internal controls. The company said that it would provide user data to authorities only if legally compelled to.
theaustralian.com.au 8 Nov 2010