Deputy Prime Minister Nick Clegg said:
"The first duty of any government is to keep the public safe and the committee that's looked at the Home Office proposals say there is a problem and we need to do something about it. I agree with them.
"But we equally have a duty to make sure that we do that in a way which doesn't lead to unnecessary or excessive snooping on people's emails and telephone calls.
"The committee has said the proposals as they're presently drafted are over the top in important respects, not workable in other respects and possibly very expensive for British taxpayers.
"That's why we now need a fundamental rethink, go back to the drawing board and come back with proposals where we get the balance right."
Wikipedia founder Jimmy Wales said: "I think that's one of the biggest dangers is the impact on the start-up ecosystem in Shoreditch. If we want to host the next Facebook we want those young companies 100 per cent focused on making a great product that people enjoy.
"Paying them to deviate from their normal task in order to comply with complex security regulations; it's just going to kill it.
"Certainly we already know that there is a brain drain to Silicon Valley. Loads of young entrepreneurs will go there. The harder we make it for people to do business here the easier we make it for the US to get all our best talent."
Downing Street has responded to the furore surrounding the Home Office's proposed Communications Bill, saying: "We understand that this is a controversial subject."
David Cameron's official spokesman told a regular Westminster press briefing: "That is why the Government took the decision to subject the Bill to pre-legislative scrutiny."
The committee has come back with a series of issues and, as the Home Office has been making clear, we accept the substance of the committee's criticisms and we will look at how we can redraft the legislation to take account of those.
There is no difference of opinion on the principle here. We are all committed to fixing this problem that we have, which is that our capability is diminishing because of technology. We want to maintain that capability, we are not looking to extend it.
Wikipedia founder Jimmy Wales also said the 'snooper's bill' makes the UK less attractive for start-ups.
Lib Dem peer and ex-Director of Public Prosecutions Lord Macdonald said the 'snooper's bill' as it is will struggle to get through Parliament, especially the House of Lords. He said it needs a rethink.
Jimmy Wales from Wikipedia has said he is pleased the Joint Committee "slammed" the 'snooper's bill' as too broad, unworkable and expensive. He called the Bill "stupid".
Just when you think home office couldn’t be more shambolic, the draft data comms bill comes out and coalition are all over the shop again..
In an open letter in The Sun, Home Secretary Theresa May has said the Home Office will "accept the substance" of suggestions from MPs on the 'snooping bill'.
Countries across the world are taking action now to help them track paedophiles and terrorists who abuse new technology to plot their horrific crimes. We must not get left behind. You and your loved ones have the right to expect the Government to protect you from harm.
Politicians from all parties have agreed that new laws are needed to help the police keep pace with changing technology. Parliament has made suggestions about how our plans could be improved and we will accept the substance of its recommendations.
This law is needed and it is needed now. And I am determined to see it through.
Lib Dem home affairs spokesman Julian Huppert has issued a big warning over the breadth of the Home Office's plans for new data laws, dubbed by critics as a 'snooping bill'.
Mr Huppert said many people would be "uncomfortable" if websites they visit, such as for abortion providers or marriage counsellors, would be logged under new laws.
He also expressed concerns that the location a text was sent from could be stored, as he dismissed Theresa May's support for the bill.
– Julian Huppert, Speaking on BBC Breakfast
This is the sort of rhetoric that we were used to hearing from home secretaries from the last government arguing for 90-day detention without charge. ... It is very, very dangerous once you start collecting huge amounts of data on literally everybody on the country... that is incredibly dangerous.