SPY chiefs are pressing ahead with secret plans to monitor all internet use and telephone calls in Britain despite an announcement by Jacqui Smith, the home secretary, of a ministerial climbdown over public surveillance.

GCHQ, the government’s eavesdropping centre, is developing classified technology to intercept and monitor all e-mails, website visits and social networking sessions in Britain. The agency will also be able to track telephone calls made over the internet, as well as all phone calls to land lines and mobiles. The £1 billion snooping project — called Mastering the Internet (MTI) — will rely on thousands of “black box” probes being covertly inserted across online infrastructure.

The top-secret programme began to be implemented last year, but its existence has been inadvertently disclosed through a GCHQ job advertisement carried in the computer trade press. Last week, in what appeared to be a concession to privacy campaigners, Smith announced that she was ditching controversial plans for a single “big brother” database to store centrally all communications data in Britain. “The government recognised the privacy implications of the move [and] therefore does not propose to pursue this move,” she said.

Grabbing favourable headlines, Smith announced that up to £2 billion of public money would instead be spent helping private internet and telephone companies to retain information for up to 12 months in separate databases. However, she failed to mention that substantial additional sums — amounting to more than £1 billion over three years — had already been allocated to GCHQ for its MTI programme. Shami Chakrabarti, director of Liberty, said Smith’s announcement appeared to be a “smokescreen”. “We opposed the big brother database because it gave the state direct access to everybody’s communications. But this network of black boxes achieves the same thing via the back door,” Chakrabarti said.

Informed sources have revealed that a £200m contract has been awarded to Lockheed Martin, the American defence giant. A second contract has been given to Detica, the British IT firm which has close ties to the intelligence agencies. The sources said Iain Lobban, the GCHQ director, is overseeing the construction of a massive new complex inside the agency’s “doughnut” headquarters on the outskirts of Cheltenham, Gloucestershire.

A huge room of super-computers will help the agency to monitor — and record — data passing through black-box probes placed at critical traffic junctions with internet service providers and telephone companies, allowing GCHQ to spy at will. An industry insider, who has been briefed on GCHQ’s plans, said he could not discuss the programme because he had signed the Official Secrets Act. However, he admitted that the project would mark a step change in the agency’s powers of surveillance.

At the moment the agency is able to use probes to monitor the content of calls and e-mails sent by specific individuals who are the subject of police or security service investigations. Every interception must be authorised by a warrant signed by the home secretary or a minister of equivalent rank.

The new GCHQ internet-monitoring network will shift the focus of the surveillance state away from a few hundred targeted people to everyone in the UK. “Although the paper [work] does not say it, its clear implication is that those kinds of probes should be extended to cover the entire population for the purposes of monitoring communications data,” said the industry source.

GCHQ placed an advertisement in the specialist IT press for a head of major contracts to be given “operational responsibility for the ‘Mastering the Internet’ (MTI) contract”. The senior official, to be paid an annual salary of up to £100,000, would lead the procurement of the hardware and the analysis tools needed to build and run the system. Ministers have said they do not intend to snoop on the actual content of e-mails or telephone calls. The monitoring will instead focus on who an individual is communicating with or which websites and chat rooms they are visiting.

Advocates of the black-box system say it is essential if the authorities are to keep pace with the communications revolution. They say terrorists are stateless, highly mobile and their communications are difficult to detect among the billions of pieces of data passing through the internet. Last year about 14% of telephone calls were made using voice over internet protocol (Voip) systems such as Skype. A report by a group of privy counsellors predicts that most calls will be made via the internet within five years. GCHQ said it did not want to discuss how the data it gathered would be used

-TimesOnline