Civil liberties group Statewatch has been given leaked documents revealing that the Council of the European Union is backing the move to retain phone, e-mail, fax and Internet communication data for up to seven years.
Following prompting from its law enforcement agencies, the UK government - along with Belgium, Germany, France, Holland and Spain - wants communication companies to keep records in case police forces need to search them during criminal investigations.
The move would force Net service companies, telecommunication firms and mobile phone operators to retain every call made, e-mail sent or Web site visited.
Current EU legislation ensures that law enforcers must get permission before tapping electronic communications and restricts the amount of time that communication firms can keep data before it has to be destroyed.
Tony Bunyan of Statewatch said: "Authoritarian and totalitarian states would be condemned for violating human rights and civil liberties if they initiated such practices.
"The fact that it is being proposed in the 'democratic' EU does not make it any less authoritarian or totalitarian."
Caspar Bowden, from the Foundation for Information Policy Research, added: "The government has repeatedly denied supporting these quasi-totalitarian measures, but it turns out they have been secretly lobbying at European level all along. This is sheer duplicity."
The civil rights group Liberty is alarmed by the EU's decision and has called for data privacy to be protected.
Director John Wadham said: "This is a disappointing development. Systems for keeping us under surveillance are developing faster than safeguards to protect our privacy."
Despite the concerns, The Confederation of British Industry believes that the European parliament will not agree to the new proposals.
A spokesman said: "The new data protection directive will be negotiated at the Telecoms Council and will of course go through the EU co-decision procedure. We don't see the parliament agreeing to sweeping powers of data retention and we will continue to lobby in favour of the protection of traffic data."