What exactly is the government's thinking for this?
Far be it from me to point out the obviously unwarranted assumption in that statement.
Do they really expect terrorists or child molesters or possessors of abuse photos and videos to go "Better not use encryption. I'll be breaking the law."
That was exactly what Labour expected when they introduced RIPA. "Oh, as a child-molesting, money laundering terrorists I could go to prison for two years if I don't reveal my key and my evil plans...or reveal the key and go down for life. Fair cop, there you go, guvnor, here's me keys". I'm paraphrasing my former Labour MP, only slightly exaggerating for comic effect. She couldn't see the flaw in her logic.. not that her Tory successor is much better.
Didn't work against the bad guys last time. Won't work against the bad guys this time. Much like banning handguns didn't stop crims using them. Does cause a lot of problems and inconvience for law-abiding folks, though.