The UK government will come under attack again on Monday at the third reading of its controversial Regulation of Investigatory Powers Bill.

The proposed legislation will oblige ISPs to provide facilities for police and other agencies to intercept emails and internet traffic, moves which the Labour Party says is vital for fighting crime. But critics argue that the costs to ISPs along with the 'Big Brother' implications will reduce confidence in electronic commerce and possibly slow down its adoption.

Caspar Bowden, director of the Foundation for Information Policy Research (FIPR), said: "This is the last opportunity for the government to face reality."

Tory home affairs spokesman Oliver Heald said: "This is an ill thought through mishmash, and the government is rushing to get it into law."

A key issue is a provision in the Bill giving police access to users' decryption keys. "It's an offence to fail to provide them, but this reverses the burden of proof, because you have to come up with an explanation for why you can't hand keys over," warned Heald.

The requirement for IT managers to hand over encryption keys on demand was added to the proposed legislation last year, after the government ceded to industry pressure to abandon its key escrow policy.

Escrow would effectively have required copies of all keys used with strong encryption software to be lodged with a third party, where security agencies could copy the keys.

Chris Sundt, an ICL security consultant and chairman of parliamentary lobby group Eurim's secure ecommerce group, said: "Foreign companies will look at the letter of the law, and say the UK is a dodgy place to do business because of the unknown liabilities. They will go somewhere else."

Tim Pearson, the Internet Service Providers Association chairman, said: "The government seems determined to push this through. We have tried to work out what the costs are, but it hasn't responded with a clear statement as to what costs we will have to bear."

A study commissioned last week for the Home Office suggested full interception of internet traffic could cost £1.3m in the first year for a large ISP. FIPR says the total cost for all ISPs could reach £34m.First published in Computing