The Government has ruled out a controversial proposal to set up a database to store internet and telephone traffic, saying it prefers to have such information held by private companies.
Home Secretary Jacqui Smith says the data is needed to combat terrorism and other crimes. Critics have called the idea excessive and an infringement of civil liberites.
Home Office research has estimated the proposal would cost up to £2bn to implement.
In a statement, Smith stressed that the information from mobile phones and computers that might be needed would be the "who, when, where and how" of communications and not the content.
"My key priority is to protect the citizens of the UK, and communications data is an essential tool for law enforcement agencies to track murderers and paedophiles, save lives and tackle crime," she added.
"It is essential that the police and other crime-fighting agencies have the tools they need to do their job. However, to be clear, there are absolutely no plans for a single central store."
In nearly all recent major counter-terrorism trials, prosecutors have used data about phone calls as part of their court case against suspects.
Details about where calls were made, to whom and for how long have been used to show links between mobile members and as evidence of preparation for an attack.
The Government still proposes legislating to allow all data that public authorities might need, including that generated overseas but crossing British networks, to be collected and retained by communication service providers (CSPs).
Opposition parties have strongly criticised the idea, saying officials had shown they could not be trusted with people's confidential information after a series of embarrassing data-loss scandals.
Civil rights groups say it would be a massive invasion of privacy.
"The big problem is that the Government has built a culture of surveillance which goes far beyond counter-terrorism and serious crime," said Conservative home affairs spokesman Chris Grayling.
"Too many parts of government have too many powers to snoop on innocent people and that's really got to change."