The Lords have questioned the value of a £12bn database to collect all UK communications.
Baroness Miller of Chilthorne Domer asked whether, with three billion emails and 57 billion texts sent every year, it would be viable to realise proposals to keep email, internet and telephone data for at least a year.
Speaking in the House of Lords today, she asked: "Is this going to be the most effective way to fight terrorism given the estimated cost is up to £12bn?" and queried whether the database was a "step too far".
Minister for security and counter terrorism Lord West of Spithead argued such information was vital to protect the public.
West indicated the government was looking to have a database in place by 2012, saying it would help retain communications data as the public moved to using VoIP for everyday calls.
"This data has been used in 95 percent of serious crime cases and helps to pin people down," he said.
According to West, the proposals will help make sure police can rely on communication data to convict criminals and terrorists as society increasingly adopts mobile and internet communications.
"No decision has been made yet, but it would be a terrible mistake to lose all this data and not be able to prosecute some very unpleasant people," he added.
West ignored the Lords's demands to reveal details of a recent presentation given to internet service providers on the database proposals, and said the public will be fully consulted.