According to BBC News and the Observer newspaper (I'd recommend the Observer story), the British secret police have made this request to government, and it's being considered.
Legislation has recently granted UK citizens (technically, we're still subjects of the damn Queen, but we'll leave that for another day) the right to privacy, but it doesn't appear that the police, MI5 and MI6 (our military intelligence) are aware of it. Or perhaps they don't care.
The justification is the usual: the fight against terrorists and paedophiles. Clearly, they must realise that terrorists don't use plaintext on Hotmail, nor do they call each other up on land-lines and say where the bomb is. Equally, paedophiles use steganography, encrypted data sent on CD-Rom, and images set to display at size zero on innocent looking websites. There are even rumours that they send stuff by post.
Now, it seems obvious to me (and I'm perhaps the least geeky person on this wonderful site) that well-funded terrorists and determined perverts are the last people this is even intended to get. It's those planning to go to Seattle 2, or anti-nuke people, or even pro-fox hunting people. It's the farmers and truckers who blocked fuel here in September.
It's equally obvious that this is an issue where we could unite big business, libertarians, greens, anarchists, the liberal left, and indeed anyone who doesn't like the idea of their call to their boyfriend being trawled for crime. But have we been part of such a broad coalition? Not so far. Why? Perhaps we spend too long posting to things like Kuro5hin and the other one? Suggestions greatly appreciated (other than links to civil liberties websites!).