Despite progress in certain areas, the Committee says that the main problem with the Government's project to gather information electronically on all travellers entering or leaving the UK, is that what it requires will make it illegal to operate on intra-EU routes under the EU treaty.
An EU Member State cannot impose any requirement other than simple production of a valid identity document on an EU citizen except in exceptional circumstances.
The Committee says the UK Border Agency (UKBA) is imposing expensive requirements on the private transport sector for the eBorders programme, in the name of urgent public good, without apparently having ascertained that the programme requirements are lawful.
There are also problems with national data protection laws.
The Committee says it has "seen no proof that UKBA’s predecessors held serious talks with the European Commission about this", and it must now urgently seek an authoritative opinion from the European Commission on this issue.
It must also make it a priority to discuss all the national level data protection problems with the relevant bodies.
UKBA must report the results of these discussions to the Committee by the end of February at the latest, and in the meantime, any proposals to extend go live to further intra-EU routes must be put on hold.
The Chairman of the Committee, The Rt Hon Keith Vaz MP, said:
"The ins and outs of the technical problems are one thing – UKBA has made some progress in some areas, particularly with the airlines after our intervention, but seems to be having greater problems co-ordinating with the way some of the other modes of transport in and out of the UK work.
"But the major stumbling block, and a very disappointing oversight, is that we are sure that what the programme requires will be illegal under the EU Treaty.
"The programme is intended to cost the taxpayer £1.2 billion and may be illegal. It is shocking that money has already been spent on a programme which could never be implemented.
"This programme is supposed to cover tens of millions of passengers intra-EU account for a very significant chunk of travel in and out of the UK.
"Until this legality is resolved UKBA must just halt any further work to go live on intra-EU routes. We cannot have another massive IT project which flounders or is even abandoned at huge cost to the taxpayer, it is simply unacceptable."