You can read my take in a new article for Index on Censorship, which concludes:
While the government’s retreat from a central database of everyone’s online activities is to be welcomed, we should not lose sight of the invasiveness (and expense) of their remaining proposals. Shadow Home Secretary Chris Grayling said today that ‘too many parts of Government have too many powers to snoop on innocent people and that’s really got to change’. The UK should not be leading democracies and autocracies alike in wiretapping the Internet.
UPDATE: Oh look! "SPY chiefs are pressing ahead with secret plans to monitor all internet use and telephone calls in Britain despite an announcement by Jacqui Smith, the home secretary, of a ministerial climbdown over public surveillance."
UPDATE 2: Sir Bonar Neville-Kingdom writes: "We won’t monitor all of it, just some of it. We won’t monitor the phone call itself, just who rang whom, when, for how long and from what location. We won’t target everyone in the UK, although for reasons of equality and balance everyone’s communications data will be kept. Our actual 'targets' will be a fraction of the entire population. We won’t store it centrally. It will be dispersed and for reasons of cost the actual databases will reside with our private sector partners. Thus we continue to do what we do, yet are able to issue a forceful, plausible and entirely truthful denial… Dealing with the news media requires a subtlety which our friends in Cheltenham, with their inevitable but unhealthy introspection and somewhat 'geeky' culture, have never had the proper chance to acquire."