The government spent more than £10m last year for communications companies to store details of phone calls, e-mails and internet searches.
This emerged from a written answer to a parliamentary question on why the government monitored internet traffic.
Figures released by the Home Office show that the amounts it has paid out over the past five years have risen from £84,582 in 2004/5 to £10.2m for 2008/9.
Home Office minister David Hanson said the Home Office did not monitor internet traffic. But it did sponsor systems to enable communications service providers (CSPs) such as BT and Virgin Media to store communications data.
"Communications data, are the who, when and where of a communication, but none of the content," he said.
CSPs are required to retain communications data under the European Data Retention Directive (EDRD), and do so voluntarily under the Anti-Terrorism Crime and Security Act 2001 (ATCSA) code of practice on data retention.
The Home Office is consulting on a proposal to modernise its ability to tap communications systems on the internet. It is reported to have already spent £1bn on a pilot system, and that one of the proposed options could cost as much as £12bn.
Taxpayer money spent on monitoring internet comms