Even if posession of encrypted messages without the ability to decrypt carries a 10 year prison sentence?
(Yes, this has serious enforceability problems, but that doesn't mean it can't become law)
The "Terrorists" really don't care about the law or the prison sentence behind breaking it.
Law is social code and it runs not on logic but on the belief of a sufficient majority of the public. If technological factors cannot be overcome, social ones can. You are very naive to think that a governmental entity has to care about logic with regard to individual humans, just as ants would be naive to think they could dissuade you from stepping on them when you walk through the garden. The fact that encryption is technically possible under almost any circumstances (even in prison you could conceivably exchange encrypted messages tapped out in morse code through the walls, say) doesn't matter because the calculus of criminal responsibility doesn't depend on some objective process int he way that an encryption algorithm does.
Nerds are very logical, but people in general are not, and appealing to their sense of logic or consistency is dangerous because you cannot rely on them to change their behavior or attitude for cognitive reasons. Organized religion epitomizes this; people may or may not believe in the actuality of an inaccessible personal divinity, but a) the social rewards for professing to do so may vastly outweigh other considerations, and b) the people who do believe will abandon logic before they'll abandon a belief structure that makes them feel good about themselves.
The UK Home Secretary isn't applying for a job in network security or at a tech company. She's telling people what sort of trouble they're going to be in if they insist on deploying or using strong encryption. And since she's in charge of the police, she is capable of making good on those claims. She is perfectly competent - not at the consistent management of information systems, but at wielding political power.
Your idea of winning an argument is a logical demonstration that would be accepted by your peers. A social entity's idea of winning the argument (by social entity I mean an organized collective intelligence, from a village to a superstate) is to simply remove you physically from the field of play. Societies are coordinated in the same manner as insect swarms or other eusocial structures; They are no less distinct for being distributed, and logical arguments have no meaning to them except insofar as they impact the swam's environment, which is not at all the same thing as the environment of the individual swarm members, even the most senior ones.
This is why a 'privacy first' app/platform/protocol will never succeed on those merits alone. The social body can always make arguments against privacy, for exactly the same reason that you don't care about the feelings of any cancerous or invasive cells that spring to life inside your physical body. What's needed are tools that are built to include privacy from the ground up, but whose use case is better speed and functionality, such that people cannot bear to go without the tools they confer an overwhelming economic advantage.
Thus, fax machines were more 'private' than telex machines insofar as fax transmissions were harder to decrypt, plus they could just be plugged into any telephone socket. But if that had been their only advantage they'd have been banned. the overwhelming benefit of a fax machine was that you could just feed a sheet of paper into it - almost any kind of paper - and send it to someone else by pushing a single button. This was a massive time-saver for business - much cheaper and simpler than installing a Telex system, much cheaper and faster than sending documents around by courier, and much more practical than relying on verbal agreements and notes from telephone conversations.
(I'd like to make it clear that fax machines were never designed or marketed to be secure comms channels, but as a purely practical matter they filled that function for many people, and people who still use faxes often do so because they feel somehow more 'secure' than email.)
