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Dr. Julian Lewis (New Forest, East): In view of the right hon. Lady's explanation of the difficulties that were faced by the intelligence services, does she agree that one unnecessary difficulty was that, after an earlier attack, it was disclosed that intelligence services in the United States had had some success in listening in on Osama bin Laden's satellite phone, but that thereafter they were never able to do it again? Does not that confirm exactly what the right hon. Lady has been saying about the balance that has to be struck between oversight and the maintenance of security on desperately secret information?

Ann Taylor: Yes, when I heard that information I was struck by exactly that kind of difficulty, although I am afraid that these days we have to expect that terrorists will be sophisticated and will have some idea of the attempts that are being made to monitor what they are doing. The hon. Gentleman makes a valid point, and it was partly because of the openness of other people's systems that that information got out as early as it did; perhaps it would have been better if the information had not got into the public domain so quickly.

In looking back, the Committee asked itself whether the agencies had missed anything that they were in a position to know or whether assessments made at the time were wrong. That was not an easy question and our conclusion was that

mention has already been made of that today because it is a wonderful thing—

I am pleased that in paragraph 6 of the Government response, which was published shortly after our report, Ministers indicate their agreement with our assessment.

We did not conclude—I want to make this point directly, and I am glad that the Chairman of the Foreign Affairs Committee is in the Chamber this afternoon—that

We did not conclude that, but I use those words because they come from the press release issued by the Foreign Affairs Committee when it published its report on foreign policy aspects of the war against terrorism on 19 June. My Committee takes issue with the Chairman of that Committee when the press release goes on to say:

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We have not concluded likewise and we think it important to put that on the record.

Donald Anderson (Swansea, East): We await the results of the inquiries in the United States, but my right hon. Friend will be aware that we in the Foreign Affairs Committee made our conclusions on the basis of the information that was available to us. She and the members of her Committee have a certain degree of privileged access. She will recall that when the Intelligence Services Act 1994, which set up her Committee, received its Second Reading on 22 February 1994, the then Foreign Secretary, Lord Hurd, gave a pledge to the House that the new Committee would not truncate in any way the existing responsibilities of Select Committees. In the light of her experience, not least in an area such as this, does she in any way feel that that pledge has not been kept, and that perhaps Committees such as the Foreign Affairs Committee could be better focused if they had better access?

Ann Taylor: No, is the simple answer to that. All I would say is that the Foreign Affairs Committee did not have access to this kind of information before the Intelligence and Security Committee was established, so I do not think that that has made any difference to the work that his Committee can do. I take his point about the United States, but as I said earlier, we have not been looking at the agencies there, and it is important that parliamentarians here stick to their own ground rather than second-guess conclusions over there. I did think it important that we should not have any misinterpretation about what the Intelligence and Security Committee believes and that is why I sought to put it on the record, not to attack the Committee, as I believe an Opposition Member sought to suggest.

Mr. Alan Duncan (Rutland and Melton): I do not want to throw the right hon. Lady off her stride, but in congratulating her and her Committee on their work, may I invite her to say, if she is able, whether she thinks that the two main intelligence agencies in Britain—the distinction between domestic and overseas intelligence having been rendered somewhat artificial by the modern nature of the terrorist threat—are now working well together to counter that threat, or does she harbour concerns that the separation remains?

Ann Taylor: I think that I can speak for every member of the Committee when I say that we are very impressed by the levels of co-operation between British agencies. We have all read discussions in the public domain about the situation in the United States. It is not for us to comment on that, but we are impressed by the level of co-operation that we have seen and know to exist between the agencies that we oversee.

That is not to say that we have no concerns at all. We do have some concerns, and, even following the point that I just made to my right hon. Friend the Member for Swansea, East (Donald Anderson) about 11 September and the build-up, we highlight some in our report. For example, we point out that the reduction in funding of the agencies in the 1990s meant that they were resource limited and operating under financial pressures, and that

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while there were improvements in the late 1990s, there were shortfalls that probably impinged on the work of the agencies in that longer-term context.

We were also concerned—one of my colleagues may wish to talk about this later—whether the agencies had sufficient flexibility to cover all the languages that were needed, and so respond quickly enough. Perhaps the most significant concern that we have post-11 September is the fact that the concentration of effort in that area of work means that gaps are developing that could lead to unacceptable risks in the future, although not necessarily at the moment. We believe that the agencies responded rapidly and well post-11 September. The staff worked long hours and were flexible and responsive to all the requests about what they should be doing. There was a great deal of co-operation and collaborative working.

The Committee also recognises that the Treasury responded very quickly and well to the agencies' extra needs, but even with those resources it will take time to recruit and train new staff, as they will be inexperienced and will have a lot to learn. We therefore believe—and perhaps it is timely for us to say so—that the agencies must have secure funding to allow them to fulfil the new demands that have been placed on them. We are worried about the gaps that are developing and believe that it is important that funding and planning are got right now to prevent the gaps from getting out of hand and creating serious dangers. To prevent that from happening, we need some very significant decisions now. That is why the Committee will consider with interest the statement on spending that the Treasury will make in the very near future.

I should like to turn briefly to one of the other matters raised by the shadow Home Secretary, which again is linked to funding: serious organised crime. We all recognise that such crime is an increasingly challenging problem for all law enforcement agencies and that the intelligence agencies can contribute in that regard. Class A drugs, organised immigration crime, serious financial crime and the funding of terrorist activity are all first-order priorities for the agencies. I hope that that will reassure him and others.

Of course, work in that area can make a tremendous difference. We cite one example in our report involving money laundering in the north-west, where fantastic amounts were channelled through bureaux de change over a very short period. The unique role and skills of the agencies, which the right hon. Gentleman mentioned, meant that they could assist law enforcement agencies in achieving a satisfactory result. We believe that such assistance shows its own worth.

The right hon. Gentleman was wrong to say that the money was so limited. Ministers may want to put him right about that. The Committee mentions some of the ring-fenced money for drugs-related work that is in the public domain and which also goes to the agencies. None the less, he was right that the work was good value for money—I am not sure whether he is a good ally on that point—and that more should be available.

As the right hon. Member for Berwick-upon-Tweed (Mr. Beith), a colleague on the Committee, mentioned, it cannot be right simply to transfer money from another aspect of the agencies' work. If extra work is to be done, it will have to be done with new resources and new money. The right hon. Member for West Dorset will have

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to square that politically with his colleagues, although in political terms it is not a matter that the Committee even started to discuss. We regard such expenditure as an investment and make a very strong recommendation in our report that more resources are required in this area and that there will be a very good return for the Treasury as well as for society if we increase our activities in tackling drugs, money laundering and people smuggling. There is a very significant payback to the Treasury and, perhaps more importantly, to society.

I should like to say one or two more words about expenditure, although I do not want to continue for too long. The Committee was very pleased in conducting its investigations that the then Chief Secretary to the Treasury gave evidence to it for the first time. We were slightly alarmed that he was moved from his position almost immediately afterwards, but we trust that the two events were completely unrelated and hope that the new Chief Secretary will give evidence in due course. The Committee made all those points about expenditure to the Chief Secretary, as one of its responsibilities is to examine the agencies' expenditure.

It is important to mention on the Floor of the House a couple of the Committee's concerns about GCHQ. First, for 2000-01, the Comptroller and Auditor General was

so the validity of the GCHQ accounts was qualified. We regard that as a serious matter, not least because this is not the first time that it has happened. The Committee acknowledges that some action is being taken and recognises that GCHQ is getting help from the National Audit Office, but it believes that the director of GCHQ, the Cabinet Secretary and the Foreign Secretary must ensure as a matter of priority that appropriate management processes and procedures are in place.

Secondly, and perhaps even more important, the Committee has been watching with great interest the progress of the new accommodation project for GCHQ. In particular, we are concerned about the changes to the projected cost of relocating to the new building. Of course, the situation has changed since 11 September, because of the need for additional staff, which we know will result in extra costs, but we are worried that the agreed relocation budget may be too low. We do not want GCHQ to be forced to reduce its operational effectiveness in order to keep within the relocation budget. The Government say in their response to our report that they are confident that that will not be a problem, but we will watch the matter very closely indeed, as we think that it could be another difficulty that looms up in future.

Finally, I should like to say a word about the national intelligence machinery. As has been mentioned, recent changes have been announced by the Prime Minister, with the appointment of Sir David Omand as security and intelligence co-ordinator. The Committee has had the opportunity to discuss the changes that will take place with Sir Andrew Turnbull, who is to be the new Cabinet Secretary, as well as with Sir David. We have been able to discuss with them some of the thinking behind the change and the reasons for it. However, the system will be new and it is not yet in place. The Committee has already made it clear in its future work programme that we will consider the role and function of the national intelligence machinery. The Home Secretary indicated

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that my right hon. Friend the Foreign Secretary might say a little more about that later. We look forward to finding out about how the system will work and to hearing anything else that he has to say.

I must make one more point about the machinery before I conclude. I know that other colleagues will want to mention the same issue, on which the Committee of the previous Parliament also homed in: the fact that the ministerial committee on the intelligence services—the CSI—has not yet met. Obviously, since 11 September, there have been a lot of ministerial meetings on intelligence, but the whole Committee believes that it would be in everybody's interests for Ministers to have proper and formal meetings to discuss the overall performance, priorities and funding of all our agencies. I cannot understand why the CSI has not met. I think that it will be a great help to Ministers to discuss priorities collectively and that that will add an important dimension that is not available under the current system. I hope that they will consider that issue carefully and move in that direction.

As a newcomer to the process of oversight, I am pleased by the way in which the situation has evolved. This is still a relatively young Committee, and the access that has been given to it and the roles that it has taken on have evolved since it was first established. It represents a good basis for oversight of the agencies, but the situation is not static, and I am sure that oversight involving the Committee, as well as other aspects that have been mentioned, will evolve further over time. It is useful to have that oversight, and I thank my colleagues for their help and co-operation in my chairing of the Committee.

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