01279_FC_BC_TP 6/6/03 9:45 am Page c

Intelligence and Security

Committee

Annual Report 2002–2003

Chairman:
The Rt. Hon. Ann Taylor, MP

Intelligence Services Act 1994

Chapter 13

Cm 5837 £8.00
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Intelligence and Security

Committee

Annual Report 2002–2003

Chairman:
The Rt. Hon. Ann Taylor, MP

Intelligence Services Act 1994

Chapter 13

Presented to Parliament by the Prime Minister

by Command of Her Majesty
JUNE 2003

Cm 5837 £8.00
01279_ii_iv 5/6/03 11:59 pm Page ii

©Crown Copyright 2003

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INTELLIGENCE AND SECURITY COMMITTEE

The Rt. Hon. Ann Taylor, MP (Chairman)

The Rt. Hon. James Arbuthnot, MP The Rt. Hon. Alan Howarth CBE, MP
The Rt. Hon. The Lord Archer of Sandwell, QC Mr Michael Mates, MP
The Rt. Hon. Kevin Barron, MP The Rt. Hon. Joyce Quin, MP
The Rt. Hon. Alan Beith, MP The Rt. Hon. Gavin Strang, MP

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INTELLIGENCE AND SECURITY

COMMITTEE

Annual Report 2002–2003

Contents
Glossary – pages 3–4

Introduction – pages 5–6

Work Programme – pages 6–7

Threats to the United Kingdom and its Citizens – page 7

Expenditure and Resources – pages 8–13

SR2002 – pages 8–9
Public Service Agreements and – page 9
Service Delivery Agreements
Security Service – pages 9–10
Secret Intelligence Service – page 10
GCHQ – pages 11–12
New Accommodation Programme – pages 11–12
Agency Resource Accounts – pages 12–13
Investment in Information Technology – page 13

Administration – pages 14–15

SIS Staff Matters – page 14
Recruitment and Retention – page 14
Commissioners and the – page 15
Investigatory Powers Tribunal

Policy – pages 15–16

Investigator’s Reports – pages 15–16
New Legislation – page 16

The National Intelligence Machinery – pages 16–22

CSI and Requirements and Priorities – page 17
JIC Papers – pages 17–18
IMINT – page 18
JTAC – page 18
SCOPE – page 19
Collection Gaps – pages 20–21
Special Branch – pages 21–22
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Bali – page 22

Weapons of Mass Destruction – pages 23–25

Iraq – pages 24–25

Other Matters – pages 25–27

Serious Organised Crime – page 25
Information Assurance and Communications – pages 25–26
Postal Interception – page 26
Statutory Functions/Acts of Parliament – pages 26–27
Use of Intercepted Material – pages 26–27
Official Secrets Acts – page 27

Committee Matters – page 27

Conclusions and Recommendations – pages 28–29

Future Programme of Work – page 30

Annex A – Those Who Have Given Oral Evidence – pages 31–32

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GLOSSARY

ACPO Association of Chief Police Officers

CNI Critical National Infrastructure

C&AG Comptroller and Auditor General

CPC Counter-Proliferation Committee

CPIC Counter-Proliferation Implementation Committee

CSI Ministerial Committee on the Intelligence Services

DIS Defence Intelligence Staff

DPA Data Protection Act 1998

DTI Department of Trade and Industry

EB Executive Branch (in SIS)

FCO Foreign and Commonwealth Office

*** ***

GCHQ Government Communications Headquarters

IA Information Assurance

IAEA International Atomic Energy Authority

IMINT Imagery Intelligence

IT Information Technology

JIC Joint Intelligence Committee

JIC R&P JIC Requirements and Priorities

JTAC Joint Terrorism Analysis Centre

JWI Joint Working Initiative

LEA Law Enforcement Agencies

MoD Ministry of Defence

NAO National Audit Office

NAP GCHQ’s New Accommodation Programme

NATO North Atlantic Treaty Organisation

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NCIS National Criminal Intelligence Service

NIM National Intelligence Machinery

NISCC National Infrastructure Security Co-ordination Centre

PFI Private Finance Initiative

PJHQ Permanent Joint Headquarters

PSA Public Service Agreement

REU Restricted Enforcement Unit

SB Special Branch (Police)

SDA Service Delivery Agreement

SIA Single Intelligence Account

SIAC Special Immigration Appeals Commission

SIGINT Signals Intelligence

SIS Secret Intelligence Service

SRO Senior Responsible Owner

SR2002 Spending Review 2002

SR2004 Spending Review 2004

UN United Nations
WMD Weapons of Mass Destruction

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INTRODUCTION
1. This Annual Report covers the period May 2002 to April 2003 and is the second
Annual Report produced by the Intelligence and Security Committee (ISC) under the
chairmanship of the Rt. Hon. Ann Taylor MP. The Committee also produced a special
Report Inquiry into Intelligence, Assessments and Advice prior to the Terrorist Bombings
on Bali 12 October 2002 in December 2002.

2. The ISC is established under the Intelligence Services Act 1994 to examine the
expenditure, administration and policy of the United Kingdom’s three intelligence and
security Agencies: the Security Service, the Secret Intelligence Service (SIS) and the
Government Communications Headquarters (GCHQ). The ISC members are appointed
by, and report directly to the Prime Minister, and through him to Parliament by the
publication of the Committee’s Reports. The members are notified under the Official
Secrets Act 1989 and, as such, operate within ‘the ring of secrecy’. The Committee has
also taken evidence from the Security and Intelligence Co-ordinator, the Chairman of
the Joint Intelligence Committee (JIC), the Defence Intelligence Staff (DIS) and other
organisations that receive secret intelligence from the Agencies.

3. The Committee sees significant amounts of classified material in carrying out its
oversight duties and it questions and has taken evidence from Cabinet Ministers and
senior officials – all of which is used to formulate this Report. When laying this Report
before Parliament, the Prime Minister, in consultation with the Committee, excludes
any parts of the Report (indicated by the *** in the text) that would be prejudicial to the
continuing discharge of the functions of the three intelligence and security Agencies. To
date, no material has been excluded without the Committee’s consent.

4. During the year, all the Agencies have been under intense pressure due to the
consequences of the Al-Qaida attacks on 11 September 2001, the Bali bombings on 12
October 2002 and the Mombasa attacks on 28 November 2002. In addition to all this,
the continuing action in Afghanistan and the growing crisis in Iraq, and subsequent
military action, led to a further substantial increase in demand for additional collection
and deployment of resources, which was met fully with the utmost urgency. Meanwhile
day-to-day coverage of other matters such as other terrorist threats, the counter-
proliferation of Weapons of Mass Destruction (WMD) and anti-drugs work has had to
continue.

5. The Agencies’ resources have been increased significantly from their 1999–2000
levels and the programmes to increase staff numbers and technological developments
are beginning to show success. The Agencies are coping well with the extra demands,
but this has inevitably resulted in reductions elsewhere. These matters will be covered
later in this Report.

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6. Our Annual Reports inevitably tend to focus on the areas that the Committee
believes are problems or will develop into problems. So it is important to highlight the
numerous successes that the Agencies have had in the last year, many of which cannot
be reported to avoid prejudicing current and future operations. It must be stressed that
the Committee holds the Agencies and their achievements in high regard and any
criticism or comments should be judged in this context.

WORK PROGRAMME
7. The Committee’s work programme in the reporting period fell into two main
sections. The first was dominated by investigations into the terrorist bombings in Bali.
In the second section, evidence was taken on the role and function of the National
Intelligence Machinery as well as the work of the Agencies to counter the proliferation
of WMD. We also took evidence on a number of matters raised in the previous year’s
report, such as Information Assurance (including Defensive Information Warfare) and
the centrally sponsored SCOPE programme. Additionally, the Committee was regularly
briefed on the Agencies’ work, particularly on Iraq. A full list of the witnesses can be
found at Annex A.

8. In the context of the Committee’s oversight work a number of visits were made
within the UK and abroad. The Committee visited all three Agencies’ headquarters, the
SIS’s staff training facility and a sub-agency of the SIS, which provides scientific and
technical development facilities and operational support for both the SIS and the
Security Service. Visits were also made to the National Criminal Intelligence Service
(NCIS) and to police Special Branch units in London and South Yorkshire.

9. The Committee visited the USA, South Africa and Australia in order to meet
parliamentary oversight committees, ministers and members of the intelligence and
security agencies in these countries. We also visited EUROPOL and the intelligence and
security agencies in the Netherlands. We received inward visits from parliamentarians
and officials from Romania, the USA, France and Australia.

10. As part of our commitment to work with developed and developing democracies,
the Committee hosted the third International Intelligence Review Agencies’ Conference
in May 2002 – which was attended by a mixture of oversight, parliamentary and
governmental representatives from nine countries. Topics covered included oversight as
seen by the UK’s intelligence and security Agencies, the relationship between Agencies
and law enforcement organisations, public perception and oversight and the role of
technology in oversight. The conference provided a very useful forum for oversight
bodies to exchange ideas and discuss issues; the next conference will be held in 2004.

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11. During the course of the year, the Committee examined and considered the reports
by the Committee’s Investigator given below. Relevant parts of the reports and the
Investigator’s conclusions are included in this Report.

a. The Agencies’ People Policies

b. Joint Working in the Agencies
c. The National Intelligence Machinery
d. The Agencies’ Business Planning Processes

THREATS TO THE UNITED KINGDOM AND ITS

CITIZENS
12. The Agencies, operating under their statutory mandates and ministerial
authorisations, collect secret intelligence on a wide range of subjects. Terrorism, the
proliferation of WMD, espionage and drugs and other Serious Organised Crime all
threaten the UK and therefore form a substantial part of the intelligence and security
Agencies’ work. We set out at this early stage the main threats facing the security of the
UK and UK citizens abroad.

13. The most serious threat to the UK and its citizens today is terrorism, whether
international or Northern Ireland related. Until all the Northern Ireland terrorist groups
have destroyed or decommissioned their weapons and explosives they remain a real
threat.

14. The threat from international terrorism is no less real. Both here and abroad, as the
terrible attacks on Bali and in Mombasa proved, Al-Qaida related groups and others will
strike without warning to kill and maim as many people as they can, be they tourists,
citizens or diplomats. Terrorists also pose a threat to our deployed forces overseas.

15. The intelligence and security Agencies are working to provide intelligence on all
terrorist groups in order to prevent and disrupt attacks. The Security Service also
provides threat assessments and security/protection advice for the Government and the
Critical National Infrastructure (CNI). This covers the infrastructure systems essential
to national well-being: telecommunications, energy, financial services, water and
sewerage, transport and government.

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EXPENDITURE AND RESOURCES

SR2002
16. The Spending Review 2002 (SR2002) provided the Agencies with a satisfactory
funding base with real growth over the period averaging 7% each year. The annual Net
Resource and Capital Requirements for the SIA and the Agencies can be seen in the
table below:

All figures in £ millions

2001–02 2002–03 2003–04 2004–05 2005–06

SIA Total
Resource 937.8 1033.3 1,117.9 1,146.1 1,175.9
Capital 107.7 163.8 515.8 184.1 198.9
GCHQ
Resource *** *** *** *** ***
Capital *** *** *** *** ***
SIS
Resource *** *** *** *** ***
Capital *** *** *** *** ***
Security Service
Resource *** *** *** *** ***
Capital *** *** *** *** ***

Notes
1. Figures for 2001–02 are outturns, figures for 2002–03 are estimated outturns and
figures for 2003–04 and later are forecasts.
2. The figures include the costs of the SIS and Security Service pension schemes.
3. The figures include the £54 million claims from the reserves for both 2001–02 and
2002–03.
4. In January 2003 the Treasury retrospectively reduced the Capital Charge from
6% to 3.5% and all figures have been adjusted accordingly.
5. The capital value of GCHQ’s new building comes onto the balance sheet in
2003–04.
6. The figures for 2005–06 will be revised as part of SR2004.
7. Additional Reserve Funding for Serious Crime for 2003–04 (not included in the main
table):

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SIA GCHQ SIS Security Service

Resources 12.1 *** *** ***
Capital 2.2 *** *** ***

Public Service Agreements and Service Delivery

Agreements
17. The Committee examined the Agencies’ Public Service Agreements (PSA) and
Service Delivery Agreements (SDA). These are effectively the contracts between the
individual Agencies and the Treasury. The PSAs set out the objectives and key targets
for the Agencies for a three-year period (2001–02 to 2003–04). The SDAs cover the
same time period and contain the PSA targets and measures for Improving Performance,
Managing People and Joint Working. The Agency Heads are responsible for delivering
the PSA and the SDA. Now that Sir David Omand has been appointed as the Security
and Intelligence Co-ordinator and the Accounting Officer for the SIA, the Agencies are
developing their relationships with him in this dual capacity.

18. In a previous Annual Report1, the Committee said,

“while the Agencies are working to develop sensible but challenging

measures that they can then be assessed against, some of those developed to
date seem unrealistic. We support the development of sensible, quantifiable
measures, but believe that more work is needed in this area”.

19. In evidence to the Committee this year one Agency Head stated that the PSA and
SDA were useful for planning. We believe that if the Agencies are to have PSAs and
SDAs then further work needs to be undertaken in their development to ensure
that they present realistic targets rather than arbitrary constraints or limits. We
are also concerned that the Agencies will be over-controlled by agreements with
different bodies. We will continue to monitor the situation and will report again
next year.

Security Service
20. Counter-Terrorism continues to be the main effort in the Security Service. As we
previously reported, in 2001–02 32% of the total effort was allocated to Irish Counter-
Terrorism and 25% to International Counter-Terrorism, giving a total of 57%. In
2002–03 61% of the Service’s work was allocated to countering Terrorism; however the
split between areas was different: 29% to Irish Counter-Terrorism and 32% to
International Counter-Terrorism.

1
Annual Report 1999–2000 Cm 4897

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21. Protective Security continues to be an important part of the Service’s work and
accounted for 11% of its resources in 2002–03 compared with 10% in 2001–02, partly
due to the additional £***million that the Service received in 2002–03 as part of the
post 11 September 2001 Reserve Claim. The allocation of effort to Counter-Espionage
and Serious Crime will fall slightly between 2001–02 and 2002–03, reflecting the
Service’s redistribution of resources to deal with the terrorism threat. However, work on
counter-proliferation by the Security Service has increased from just under 3% to nearly
4% over the same period.

22. The Security Service’s annual programme costs, which include interception,
agents, equipment and research and development funding will be £***million in
2002–03 rising to £***million by 2004–05. This is because of the significant increase
in research and development spending, which the Service believes is essential in order
for it to maintain its ability to gather intelligence through covert means.

Secret Intelligence Service

23. In 2001 SIS allocated *** of its effort to Counter-Terrorism; this has risen to ***
in 2002 and will be *** in 2003. Work relating to the Middle East and North Africa rose
from *** in 2002 to*** in 2003, largely due to additional work relating to Iraq. Effort
allocated to countering the proliferation of WMD also rose slightly from *** in 2002 to
*** in 2003.

24. In common with the other Agencies, SIS redistributes its resources in order to cover
urgent work and this results in a reduction in the effort to less urgent areas. For example
*** of effort was spent on *** the Former Soviet Union in 2002 but this has fallen to
*** in 2003. *** of effort was allocated to Asia in 2002, compared with *** in 2003,
while *** will be spent on the Balkans and *** compared with *** in 2002. However,
it should be noted that there is overlap between these divisions – such as between WMD
and Iraq and Counter-Terrorism and Asia, which includes Afghanistan.

25. As we reported last year, the SIS spent some *** but the impact of this
***
***
***
***
*** operation on future drug production cannot be fully measured. The operation was
not repeated this year and the SIS is concentrating on ***.
26. As reported last year and covered in more detail in paragraph 41, the SIS is
increasing the size of its staff. This increase of some *** over a three-year period has
resulted in a *** and the SIS has allocated some £*** million to the ***. Preliminary
work has started and the SIS aims to have staff working *** in 2004.

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GCHQ

27. GCHQ’s effort on Counter-Terrorism work in 2002–03 accounted for *** of its
resources and was the largest for any collection category. GCHQ is planning for this to
rise to *** in 2003–04, reflecting the growing importance of this work. Collection on
Iraq accounted for *** of GCHQ’s total expenditure in 2002–03 and it is now rising to
*** in 2003–04. Expenditure on *** will fall from *** of the total in 2002–03 to ***
in 2003–04. Similarly, expenditure on the Rest of the World (***) is planned to fall from
*** to *** in 2003–04. These changes reflect GCHQ’s redistribution of resources in
order to tackle the current threat and work required on the ***.

28. *** continues to deliver considerable value to GCHQ and it may exceed its design
life. As a consequence, GCHQ expects to extend the expected life of *** and make the
corresponding accounting changes. *** will start later this year. The Committee
wishes to record the significant contribution that *** makes to intelligence
collection.

29. The Committee is concerned about the size of the planned write-off of between
£***–*** million that GCHQ is having to make in the next year for a
developmental SIGINT system that has only partly delivered the intended
capability. We recognise that developmental work is not always successful and that
the Resource Accounting system requires GCHQ to highlight the cost of capital
equipment that cannot be used again, but we believe that GCHQ must learn the
lessons from this experience.

New Accommodation Programme

30. In our previous reports, we have continuously stressed the challenge that the New
Accommodation Programme presents to the GCHQ management. The buildings are 10
weeks ahead of schedule and the building consortium will be paid a £*** bonus for each
month that the building is completed early. The early completion will enable GCHQ to
advance technical fit-out and mitigate risk. Staff will begin to move into the new
accommodation in September 2003, once parts of the building have been fitted out. The
building should be fully occupied by August 2004. The Committee has been impressed
by the new accommodation and we look forward to seeing it being used by the GCHQ
staff. We have been told that there are only a few variations to the building costs under
the PFI contract and, as noted above, that the building will be finished ahead of
schedule. The PFI contract covers the cost of moving the staff into the new
accommodation; but it does not cover the cost of moving the technical equipment and
computers.

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31. We still have concerns about the technical transfer from the two current sites to the
new buildings. GCHQ had to obtain additional funding from the Treasury to carry out
this transition, as well as finding funds from within its own programme. The technical
transfer is capped at £308 million and the Director has assured both the Committee and
the Treasury that this amount will not be exceeded. Last year the Committee stated that
it was

“concerned that, in order to keep within the agreed relocation budget,

GCHQ may be forced to reduce its operational effectiveness and agreed
service to its customers. We would not wish to see this happening, especially
after the 11 September attacks.”

32. The Committee has been reassured that GCHQ has taken steps to maintain its
operational effectiveness during the technical relocation, including the routing of
communications and reporting through other sites in the UK. However, we remain
concerned that resources originally allocated to technological development programmes
were moved or recast to support the technical relocation. This has had the effect of
slowing GCHQ’s ability to develop new systems but, due to the significant additional
funding that GCHQ received in 2001–02, 2002–03 and SR2002, some of these
programmes have been effectively brought back up to speed.

33. In our 1998–99 Annual Report, the Committee recommended that the NAO
examine the New Accommodation Project once the PFI contract had been placed. The
NAO are now in the process of completing this examination and we will report in due
course.

Agency Resource Accounts

34. The 2001–02 Single Intelligence Account was, for the third consecutive year,
qualified by the NAO. The Committee noted that the Resource Accounts for the
Security Service and the SIS were both described by the Comptroller and Auditor
General (C&AG) as being a “true and fair” record of their expenditure. However, the
GCHQ 2001–02 Resource Account was qualified for three main reasons:
a. There was insufficient audit evidence to conclude that interest on capital charges
of £*** million (which are based on the average of the values of opening and
closing balances) and in-year depreciation of £*** million on operational
equipment were properly presented in the 2001–02 Operating Cost Statement
and associated notes.
b. Some £*** million worth of operational equipment (out of a total of £***
million) listed on the Fixed Asset Register remained to be reconciled to items
listed on the inventory system.
c. The accounting status of prepayments with a reported value of some £***
million (out of a total of £*** million) in respect of the procurement of projects
and services *** could not be verified.

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35. In his report, the C&AG states that:

“GCHQ have made substantial progress since the completion of the 2000–01
audit to address the issues raised in my report on that year’s account.
…More generally, the introduction of ***, the new *** fixed asset module,
and the parallel establishment of reliable inventory records led to
improvements in GCHQ’s accounting processes, and in the recording and
valuation of fixed assets.

“The momentum of these improvements needs to be sustained by GCHQ

during what is left of the current financial year [2002–03] if the deficiencies
and omissions described above are to be remedied in time to produce an
unqualified Resource Account for 2002–03.”

36. The Committee acknowledges that GCHQ has made significant progress in
producing a Resource Account, particularly in the area of asset management and
tracking. However, we believe that, from the introduction of Resource Accounting in
1999–2000, GCHQ did not allocate sufficient resources to produce an accurate account.
As a consequence it did not have the right people in place to ensure not only that the
*** project was introduced but that the asset registers were correct and up to date.
GCHQ now has 19 trained accountants on the staff, but in 2000 it only had 5. This, we
believe, proves that GCHQ did not originally recognise the full complexity of its
accounting problem.

37. We are concerned that the Resource Account for 2002–03 will be qualified
owing to the historical problems in the asset register. We understand that GCHQ
is taking steps to address the remaining problems but whether or not the
“momentum” described by the C&AG will be maintained is unclear. It would be a
significant failure of management if the Resource Account were to be qualified yet
again.

Investment in Information Technology

38. The Committee was briefed by the Agencies about their internal Information
Technology (IT) programmes. All three Agencies are investing substantial sums, over a
number of years, to upgrade or replace their office IT systems and, in the case of GCHQ,
to *** the SIGINT process. As mentioned earlier for GCHQ, the funding for these
developments came, in part, from the Reserve Claims made by the Agencies after the
11 September 2001 terrorist attacks. The office upgrade programmes involve using and
developing commercial off-the-shelf products, and the Agencies, supported by
consultants, have been fairly successful in their work to date. For example the
Committee was told that the Security Service spent some £*** million on consultants,
which had considerably reduced the technological risk associated with the introduction
of the new computer system. We will continue to monitor the Agencies’ investment
in IT systems.

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ADMINISTRATION
SIS Staff Matters
39. In our last Annual Report we stated that the SIS would be revising the terms and
conditions of employment for its staff. The Appraisal and Performance Bonus system
has been revised but other revisions are not yet complete. The SIS will introduce a new
grade structure for its entire staff in June 2003, which has been developed following
consultation with the staff. Under the new structure there will be 10 grades (Grade 1 the
most senior and Grade 10 the most junior), designed to recognise potential and improve
promotion. They are also linked to pay increases and career progression. As part of these
changes the SIS will increase the number of staff branches from 4 to 6 in order to give
linguists, science and technology staff and specialists their own established branches;
the traditional Intelligence, Executive and Auxiliary Branches remain unchanged.

40. The Committee remains concerned that there is no member of the Executive
Branch (EB) on the SIS board, even though the EB comprises some *** of the staff of
the Service. SIS inform us that as part of the new grading system the Service will be
doing away with the distinction between branches at Grade 4 and above, where the jobs
tend to have significant management and leadership content. We welcome this change
but recommend that steps be taken to ensure that suitably qualified and experienced
individuals other than those developed through the Intelligence Branch sit on the board.

Recruitment and Retention

41. As we described last year, both the SIS and the Security Service have ambitious
programmes to increase significantly the number of staff they recruit. Both met their
targets in 2002–03 other than in a small number of specialist languages and some IT
areas. Linguists in some languages can be difficult to recruit. There can be an additional
difficulty because of the nationality and security vetting requirements, although the
Security Service informed us that it had ***. All three Agencies have also benefited
from retired former members who have rejoined them, some on a part-time basis, for a
temporary period.

42. The Agencies took on additional security vetting staff to ensure that they could
handle the increased number of recruits. However, the Services did indicate that the
numbers of new staff being absorbed by the Agencies were putting a strain on the
training and mentoring systems. Despite this rapid increase in numbers the Agencies
assured us that the quality of recruits had not diminished, the ethos had not been diluted
and morale remained high. The Security Service noted that it was *** than in the past
and consequently they did not have the ***. However, the Director General stated that
this had not become a problem.

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Commissioners and the Investigatory Powers Tribunal

43. The Committee has not met the Commissioners or Chairman of the Investigatory
Powers Tribunal since we last reported. We have examined the Commissioners’ Annual
Reports and followed up a number of issues with the Agencies involved. We have also
been given the numbers of warrants issued by Secretaries of State for the Agencies
under the Regulation of Investigatory Powers Act 2000 and the Intelligence Services
Act 1994.

POLICY
Investigator’s Reports
44. The Committee has continued its oversight of the Agencies’ Personnel Policies. As
noted in the last Annual Report, the Agencies were planning significant staff increases,
which they are successfully achieving. The Investigator examined the different
recruiting practices of the Agencies and concluded that they were appropriate to each
Agency’s needs. The retention rates of the Agencies are good and they all make good
use of both inward and outward secondments to improve co-operation with other
organisations and to enable staff to gain experience.

45. We also examined the structure of the Management Boards. We note that all three
Boards have appointed non-executive directors or board advisors, and that these
appointments are successfully supporting the Boards thanks to the individuals’ outside
experiences.

46. In last year’s Report we stated that our Investigator had reported to us on The
Agencies’ Joint Working Initiative. The Joint Working Initiative (JWI) and the
appointment of an Efficiency Adviser were products of the 1998 review of the Single
Intelligence Vote and the Committee has commented on the Efficiency Adviser in
previous Annual Reports.

47. The JWI has ensured that the Agencies focus methodically on opportunities for
joint working. It has produced a system of formal working groups covering different
small-scale areas with varying degrees of success. The Committee supports our
Investigator’s belief that the most productive areas have already been developed and
that any future areas are unlikely to pay major dividends in terms of operational
effectiveness or financial savings.

48. We note that a new Efficiency Adviser has been appointed to develop this work.
Whilst the JWI was directed at the three Agencies working together, it did not preclude
them from working with non-Agency bodies and the Agencies are individually and
collectively pursuing opportunities for co-operation with other governmental
organisations.

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49. We note that the Chief Secretary to the Treasury has asked the Agencies to
investigate whether further joint work on IT systems might improve efficiency across
the Agencies. The Cabinet Office informed us that the Efficiency Adviser will be
working with the Agencies to review opportunities for improving the IT systems across
the intelligence community and any conclusions will be used to inform bids in SR2004.

50. The Committee has tasked our Investigator to follow up the report he produced
three years ago on “Security Policies and Procedures” in the Agencies. This report,
which is being completed in modules, will focus on the changes the Agencies have
made following the earlier report and as a result of espionage cases and breaches of the
Official Secrets Acts in the USA and the UK. The report will also cover computer and
laptop security. We will report again in due course.

New Legislation
51. A considerable amount of new legislation is coming into force. The Agencies have
programmes to ensure that all their staffs, either on joining or through re-training, have
an understanding of this legislation and how it affects their work and the rights of
individuals. In recent years there has been a significant growth in legislation and related
casework affecting the Agencies. The Director General told the Committee that she now
has 10 lawyers compared to only 3 ten years ago. They are involved in a range of
matters including the Bloody Sunday Inquiry, the Stevens Inquiry, ***, together with
the internal training programmes. The Security Service is creating legal awareness
courses in partnership with professional legal training providers. The Committee is
reassured that the three Agencies are ensuring that all staff are fully aware of the
law in relation to their work. We are aware that there is a risk that in-house
lawyers could be over-stretched, but we emphasise that the staff need to be fully
trained in this important area.

THE NATIONAL INTELLIGENCE MACHINERY

52. Last year we reported that we had tasked our Investigator to conduct an inquiry into
who collects, analyses and assesses intelligence within the National Intelligence
Machinery (NIM). He interviewed the Security and Intelligence Co-ordinator and the
JIC Chairman, together with representatives from the three Agencies, the Foreign and
Commonwealth Office, the Home Office, the Ministry of Defence (including the DIS
and the Permanent Joint Headquarters (PJHQ)), the Department for International
Development, the Treasury (including HM Customs and Excise), the Northern Ireland
Office and the NCIS. He also examined how the collection of intelligence was tasked
and the role of the Joint Intelligence Committee.

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53. On receipt of his Report we took evidence from the Foreign, Home, Defence and
International Development Secretaries, as well as the Security and Intelligence Co-
ordinator, the JIC Chairman and the Head of each Agency. The Committee also
examined the United Kingdom’s National Requirements for Secret Intelligence
2002–2005 and the JIC Chairman’s review of the Agencies’ performance 2001–2002.

CSI and Requirements and Priorities

54. In our previous Reports we have highlighted the fact that the Ministerial
Committee on the Intelligence Services (CSI) has not met. It is chaired by the Prime
Minister and consists of the Deputy Prime Minister, the Chancellor of the Exchequer
and the Foreign, Home and Defence Secretaries.

55. However, whilst CSI itself has not met, the Prime Minister, relevant Cabinet
Ministers and senior officials have met collectively to manage crises, such as
Afghanistan or Iraq, sometimes on a daily basis. These focused meetings, on short-term
and urgent problems, involving all relevant parties, have proved to be successful in
dealing with the given crisis.

56. Unfortunately, these crisis-driven and ad-hoc groupings do not provide Ministers
with an active forum in which they can make collective decisions about longer-term
intelligence requirements and priorities for secret intelligence across the full range of
topics. The current system for setting requirements and priorities is almost entirely
based on decisions and recommendations from officials, which are then endorsed by
CSI members out of committee. As a result, we believe that CSI Ministers are not
sufficiently engaged in the setting of requirements and priorities for secret
intelligence, nor do they all see the full capability of intelligence collection.

57. We were told that, as part of SR2002, the Chief Secretary to the Treasury asked the
intelligence community to take steps to improve the requirements and priorities setting
process. We have not had details of these developments, which we understand have yet
to be approved by Ministers. We hope that the new system will require Ministers to
be engaged collectively and fully in setting the requirements and priorities.

JIC Papers
58. The Committee questioned the Secretaries of State on how intelligence and the JIC
papers were meeting their needs. The Ministers confirmed that they were given the JIC
papers which their private offices believed they needed to see, and that officials in the
departments drew papers to their Minister’s attention and reflected their Minister’s
views at JIC meetings. The Ministers also said that they themselves sometimes
requested sight of specific papers.

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59. Some JIC papers are commissioned specifically to support a forthcoming visit or a
topic on which a Minister has requested information, others are requested by
departments or form part of a rolling programme. The JIC Chairman, in his review of
performance 2001–2002, noted the need to produce starker papers, which could then aid
Ministerial decision making.

60. We remain concerned that not all CSI Ministers see all the JIC papers as a
matter of routine and therefore they do not necessarily see all the assessments that
they ought to see. We believe that they should and that this would then encourage
their further participation in the requirements and priority setting processes.

IMINT
61. In evidence, the Defence Secretary stressed the importance of Imagery Intelligence
(IMINT). The Committee has previously expressed concern that the UK’s involvement
in the next generation of IMINT systems, the *** programme, needs to be fully funded
to ensure that the UK derives maximum benefit from the programme. Last year’s
Government response to our Report stated that “the necessary levels of finance will be
made available to meet this important national requirement”. We are concerned that the
MoD has only been able to provide limited funding – “what we could afford” – to buy
into the *** programme due to the pressures on the defence budget. We recommend
again that more funds are made available to maximise UK involvement in the ***
programme. As we have previously stated, we believe that the IMINT programme
needs to be funded and tasked as a national asset through the SIA and JIC, rather
than by the MoD.

JTAC
62. A major structural development within the Intelligence Community is the creation
of the Joint Terrorism Analysis Centre (JTAC). We highlighted the problems and
shortcomings of the previous counter-terrorism analysis system in our Report on the
Bali Bombings2 and the Government announced its plan to form the JTAC in its formal
response to us3. We have been told that the establishment of the JTAC will address the
points we raised. The JTAC, for which the Director General of the Security Service is
responsible, is an interdepartmental and agency body established to improve the
provision of assessed intelligence on international terrorism. The JTAC will bring
together the existing cross-community expertise, for example the Security Service’s
Counter-Terrorism Analysis Centre, the SIS, GCHQ, DIS, the police, including Special
Branch, and the security division (TRANSEC) of the Department of Transport. We were
told that the new organisation would ensure that the analysis and assessment of counter-
terrorism intelligence is a “much more collaborative process” providing increased
efficiency and responsiveness to customer requirements. We welcome this
development and will monitor the role and outputs of the JTAC and report in due
course.
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SCOPE

63. In our last Annual Report4 we recommended that the key requirements and suitable
funding be agreed for the SCOPE Business Change Programme. We followed this up by
taking evidence from the JIC Chairman, who is the Senior Responsible Owner (SRO)
for the programme in the Cabinet Office, and members of the SCOPE programme. We
were told that

“the programme has [to date] concentrated on a sound base on which to

approach its task before spending significant capital funds or committing
significant resources. This work has resulted in a much fuller and more
detailed understanding of what was required to deliver benefits to the
Programme partners and identified the need for further funding.”

64. The ten partners have now agreed the requirements for the programme and a joint
bid in 2003 to the Capital Modernisation Fund was successful. The Treasury has
awarded the SCOPE programme £*** million over the next three years, mainly for
capital funding that includes the introduction of *** new terminals and the adaptation
of existing IT systems to create a system of *** terminals ***. Additional resources
have been allocated by the three Agencies, the Cabinet Office and the FCO to enable the
programme to deliver the “Effective Information Management” system agreed by the
programme partners. The partners have also agreed the breakdown of running costs of
the programme for its first eight years.

65. We were told that the SCOPE Business Change Programme has caused partners to
review the way they interact with each other and that the Agencies’ internal systems are
being developed to enable them to interface with SCOPE, once it is introduced. The
programme will be introduced in phases and the full roll-out will commence in 2005.
Experience has shown that IT programmes of this scale pose challenges, but the
modular and phased approach of the SCOPE programme, despite security concerns,
means that significant benefit can be obtained even before the most ambitious elements
of the programme are introduced. Now that the SCOPE programme has both agreed
requirements and sufficient funding, it needs to start delivering working systems
that improve interdepartmental and Agency communications. We will continue to
monitor the programme and its impact on the intelligence community.

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Collection Gaps
66. In our Annual Report5 last year we stated that there had been reductions in collection
areas as resources were transferred to Counter-Terrorism:

“ These reductions are causing intelligence gaps to develop, which may mean
over time unacceptable risks will arise in terms of safeguarding national
security and in the prevention and detecting of Serious Organised Crime. The
Agencies must be given sufficient resources to enable them not only to fill the
staff vacancies that have been created but also to expand sufficiently to
ensure that they can meet the new demands now being placed on them.”

The Government responded6:

“The Government recognises that the increase in demand for intelligence to

support the campaign against terrorism has meant that the Agencies,
amongst others, have been obliged to review their priorities within their own
budgets. This process has been carried out professionally and carefully, and
the Government will continue to keep the situation under review. It is
inevitable that if some areas of activity become relatively more important to
the national interest, others become relatively less so and may have less
resources devoted to them. All decisions about matching resources to tasks
involve a degree of risk. Identifying, quantifying, managing, and where
possible mitigating those risks is one of the basic responsibilities of the
management of the Agencies. The Government is confident that the
judgements taken so far have been the right ones, and that no unacceptable
risks with or to national security have been, or will be taken.”

67. The above statement encouraged us, as did the fact that the Agencies have been
given additional resources and are recruiting significant amounts of additional staff. We
see a need to maintain this commitment in SR2004. As a result of the Bali and Mombasa
bombings and world developments, the Agencies have increased the resources deployed
on both Counter-Terrorism and Iraq. It takes time to recruit and train staff and
consequently not all the new staff coming in are sufficiently trained or experienced to
take on some front-line tasks, and will not be for a couple of years. The SIS has reduced
effort on developing sources in a number of areas and the Security Service has had to
reduce the ***.

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GCHQ has reduced analysis effort in a number of possible trouble spots. These
developments confirm our belief that the problem of collection gaps has worsened and
therefore risks are being taken with national security. Intelligence assets are most useful
when they can warn of and disrupt hostile action rather than being used to deal with
current crises. The Committee believes that, with the focus on current crises, the
Agencies’ long-term capacity to provide warnings is being eroded. This situation
needs to be addressed and managed by Ministers and the JIC.

Special Branch
68. The Committee has examined the relationship between the Security Service and the
police Special Branches (SB) around the country. There are 43 SBs in England and
Wales, 9 in Scotland and 1 in Northern Ireland, the largest being in the Metropolitan
Police. In conducting this work the Committee also took note of the report A Need to
Know, published in January 2003 by Her Majesty’s Inspector of Constabulary on SB and
Ports policing. We note that in the North East of England, the Association of Chief Police
Officers (ACPO) regional boundary is not coterminous with the boundaries of the
Government Regions and therefore there is only one SB Regional Intelligence Cell
covering both the Yorkshire and Humberside and the North East Government Regions.
We were told that resources constrained the development of a second cell at this initial
stage.

69. There is a very close relationship between the individual SBs and the Security
Service; in fact the SBs were described to the Committee as an executive partner of the
Security Service. For example, SBs recruit and run agents either alone or in support of
and co-operation with the Security Service, supplying the intelligence to the Security
Service if it is relevant to its work. Other SB functions are covert observation, following
intelligence leads and conducting routine national security related work, all under the
relevant legislation including the Regulation of Investigatory Powers Act 2000 and Anti-
Terrorism Crime and Security Act 2001. The SBs have sight of the relevant intelligence
and security Agencies’ requirements and work towards them in addition to their normal
policing role, which is to safeguard the public. The Director General of the Security
Service stated that the SBs continue to be a “major extension” to the Security Service in
terms of intelligence collection capability.

70. In this collection work there is an important distinction between SB and the Security
Service. While SBs investigate individuals and organisations that could present a threat
to public order, the Security Service would not investigate these bodies unless they posed
a threat to national security. This means that not all intelligence collected by SBs is or
can be shared with the Security Service.

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71. The vast majority of SB work depends on the resources allocated by individual
Chief Constables – only a limited amount of SB work conducted by the Metropolitan
Police is nationally/centrally funded. The variation in resources available means that not
all SBs are able to provide an optimum level of support to the Security Service although
this can be mitigated by co-operation between the SBs in the larger and smaller police
forces.

BALI
72. The Committee conducted an inquiry into the intelligence, assessments and advice
available to the Government prior to the Bali terrorist bombings. Our work was greatly
helped by the fact that the Foreign Secretary made the intelligence from the UK Agencies
available to us. The Prime Minister published the Committee’s Report on 11 December
2002 and the Foreign Secretary made a statement in the House of Commons, which was
repeated in the House of Lords. The Government published its response to the Report on
26 February 2003 and this, together with the Committee’s Report, was debated on 3
March 2003.

73. We reported that during the period prior to October 2002 the Agencies received at
least 150 separate reports a day relating to terrorist activity in more than twenty different
countries, including Indonesia and the UK itself. This intelligence came from a range of
sources of varying reliability, and difficult judgements about follow-up action have to be
made in each case. We concluded that, on the available intelligence, we did not believe
that the attack could have been prevented. We believe that the Security Service had made
a serious misjudgement when it did not raise the threat to general UK interests in
Indonesia from SIGNIFICANT to HIGH. However, the Committee was encouraged that
the review of the threat assessment system was informed by our recommendations and
the threat level definitions reworked. The Government also accepted the
recommendation to ensure that the assessments are produced in a timely way. The
Committee has been briefed on the reworked Threat Assessment System and the role and
function of the JTAC.

74. The House of Commons Foreign Affairs Committee has also taken evidence on FCO
Travel Advice and the FCO has conducted a review of its Travel Advice. As a result of
that review, which we recommended, the advice issued is now clearer and that the advice
given to travellers and residents is now consistent. We welcome these improvements
and recommend that the FCO continually reviews its Travel Advice to ensure that
it provides travellers and residents with clear and accurate information.

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WEAPONS OF MASS DESTRUCTION

75. As we stated in last year’s Annual Report7, the Committee returned to the work
undertaken by the Agencies to counter the proliferation of Weapons of Mass Destruction
(WMD), which we had previously considered in our Annual Report 1998–998. This
subject covers the procurement, development and production of chemical, biological and
nuclear weapons systems – together with their delivery systems, which include ballistic
and cruise missiles and the radiological weapons that could be used by terrorists. The risk
of being attacked by these weapons or of an accident occurring depends very much on
the countries or groups that have access to them.

76. In an earlier Report9, the Committee expressed concern that Ministers were not kept
fully informed of breaches to sanctions and control regimes; that UK companies were
attempting to break export restrictions; that the current reliance on sanctions and control
regimes was only slowing, not preventing, the proliferation of WMD; and that the
Agencies were not taking enough disruptive action to prevent proliferation.

77. We took evidence on this subject from the Foreign and Home Secretaries, the DTI,
Cabinet Office, HM Customs and Excise, MoD and FCO, as well as the three Agencies.
The Agencies devote a significant amount of their effort to this topic and have produced
results – disrupting the proliferation of material from the UK and elsewhere. The
fortnightly meetings of the Restricted Enforcement Unit (REU), on which all the
departments and agencies listed above sit, play a key role in preventing proliferation
from the UK and elsewhere. The REU has improved co-operation between interested
parties at the operational level.

78. However, the basic situation has not changed significantly from that of four years
ago. Most counter-proliferation work is done at official levels. A small number of UK
companies are still trying to breach export restrictions but the UK authorities seem to be
thwarting these efforts. However, world-wide, sanctions, even when effective, only slow
proliferation.

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79. In order to improve co-ordination between senior officials, particularly in the

development of policy, a new system of committees has been introduced. We were
briefed on the newly formed Counter-Proliferation Committee (CPC), which is chaired
by the Prime Minister’s Foreign Policy Adviser, and the Counter-Proliferation
Implementation Committee (CPIC), chaired by the Deputy Head of the Overseas and
Defence Secretariat. The Agencies, together with the relevant departments and the JIC
Chairman, sit on these committees – but no Ministers. We are concerned that Ministers
are not fully briefed on counter-proliferation work but we have been told that the
new official committee structure will ensure the closer involvement of Ministers. We
would welcome this. However, we believe that there is a need for greater clarity as
to the ministerial responsibility for cross-departmental co-ordination of counter-
proliferation policy and work.

Iraq
80. The Committee is grateful to the JIC Chairman and ‘C’ for the regular briefings by
which we have been kept up to date before and during the military action against Iraq, as
it was intelligence that indicated that the Iraqis were continuing to produce WMD and
their delivery means. The UN inspectors in Iraq used intelligence which was produced
by many countries, including the UK. Intelligence also played a key role in the military
action by coalition forces.

81. In September 2002 some intelligence was declassified and used to produce a dossier
on the Iraqi WMD programme. The Agencies were fully consulted in the production of
the dossier, which was assembled by the Assessments Staff, endorsed by the JIC and
issued by the Prime Minister. The Committee supports the responsible use of intelligence
and material collected by the Agencies to inform the public on matters such as these.

82. We believe that material produced by the Agencies can be used in publications and
attributed appropriately, but it is imperative that the Agencies are consulted before any of
their material is published. This process was not followed when a second document was
produced in February 2003. Although the document did contain some intelligence-
derived material it was not clearly attributed or highlighted amongst the other material,
nor was it checked with the Agency providing the intelligence or cleared by the JIC prior
to publication. We have been assured that systems have now been put in place to ensure
that this cannot happen again, in that the JIC Chairman endorses any material on behalf
of the intelligence community prior to publication.

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83. It is impossible at the present moment to make any definitive statements about
the role of intelligence and the situation in Iraq. Whilst the Committee has been
briefed, we intend to examine in more detail the intelligence and assessments
available and their use. We will report when our inquiries have been completed.

OTHER MATTERS
Serious Organised Crime
84. The support given by the Agencies to Law Enforcement Agencies (LEAs) in their
fight against Serious Organised Crime was reported to us in their annual presentations.
We believe that while the Security Service does useful work in support of LEAs, it could
do more. This view is shared by the Home Secretary, but we understand that this is
unlikely to be possible for some time because of other higher priorities, most notably
international Counter-Terrorism work. *** have been devoting additional effort to
countering Serious Organised Crime, which has resulted in the breaking up of some
people-smuggling networks in Europe and the seizure of significant amounts of class A
drugs.

Information Assurance and Communications

85. Information Assurance (IA) is the term used to cover the provision of effective
information security capability. Last year the Committee supported Sir Edmund Burton’s
recommendation that an IA Central Sponsor should be established to set the strategic
direction for all stakeholders and for auditing performance, including ‘common good’
work that would benefit the whole government machine. In its response, the Government
announced that a Central Sponsor (the e-Envoy, Andrew Pinder) had been appointed. The
Committee took evidence from the e-Envoy and the Head of the Communications,
Electronics and Security Group to see what progress had been made since this
appointment.

86. The main focus has been in the formulation of an IA strategy, which will be used to
guide the future programme. Only a small amount of work in the highly important
common good area was possible in 2002–03 since there was extremely limited funding
for IA. Some central funding has been allocated for common good work but it is only
£*** million for 2003–04. This is only a quarter of the annual funding that Sir Edmund
Burton considered appropriate to develop an effective IA programme. When questioned,
the Agencies stated that the lack of common good funding was a significant problem and
as a result vitally important programmes such as the development of *** had not been
funded. The Agencies are now faced with either funding these programmes from the
SIA or delaying the work until other funding is made available. This is
unacceptable.

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87. Last year the Committee called for the *** of secure *** communications
equipment, which would allow ***. In its response, the Government stated that “a
number of steps have already been taken to improve the position”. Some *** were
introduced and have provided a *** for secure communications. However, a long-term
solution has not been identified, neither has any funding been allocated for the
provision of the next generation of secure communications systems, and we
recommend that the Security and Intelligence Co-ordinator takes this matter
forward.

88. The matter of an aircraft fitted with secure communications equipment for the use of
the Prime Minister and other key Ministers was raised by the Defence Secretary. ***.
During crisis periods decisions are sometimes required with great urgency ***.
We are persuaded that this expense can be justified.

Postal Interception
89. The Committee has been concerned about the possible threat to national security
posed by the import of firearms, drugs and other dangerous goods into the UK by all
forms of post. We are taking evidence on this matter but our work is not yet complete and
we will report in due course.

Statutory Functions/Acts of Parliament

Use of Intercepted Material
90. There has been some discussion within Parliament and the Home Office on the use
of intercepted communications material in prosecutions. In our Report last year10 we
stated that we would examine the use of intercepted material and communications data.
Whilst the Committee has not fully explored these matters, we have discussed with the
National Prosecutors in the Netherlands their experience of using intercepted material in
courts and we will examine the findings of the recent Home Office review of the use of
intercepted material.

91. In our Annual Report last year10 we set out the policy, known as the Wilson Doctrine,
which covered the tapping of telephones of Members of either House of Parliament. The
full text of the Prime Minister’s answer11 was:

“As I informed the House on 30 October 1997, Official Report, column 861,
Government policy remains as stated in 1966 by the then Prime Minister, the
Lord Wilson of Rievaulx. In answer to questions on 17 November 1966, Lord
Wilson said that he had given instructions that there was to be no tapping of
the telephones of Members of the House of Commons and that if there were
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a development which required a change of policy, he would at such moment

as seemed compatible with the security of the country, on his own initiative,
make a statement in the House about it. The then Parliamentary Under-
Secretary of State for the Home Department, Lord Bassam, confirmed on 27
September 2000 that this policy extended to Members of the House of Lords.”

The Prime Minister has not informed us of any alteration or amendment to the stated
policy.

Official Secrets Acts

92. The Committee has not yet taken formal evidence on the Official Secrets Acts and
their usefulness. However, we believe that the legislation could benefit from a review, as
it does not seem to produce a balanced regime. We will return to this subject in due
course.

COMMITTEE MATTERS
93. In June 2002 we published a booklet Intelligence Oversight on the oversight
mechanisms in the UK for the Intelligence and Security Agencies. It was sent to all
Members of Parliament prior to the debate on the Committee’s Annual Report and it was
written to inform the public about the work and role of the Committee.

94. To further public awareness of the intelligence oversight process, we have set up a
website, hosted by the Cabinet Office, which contains information about the Committee,
the booklet and links to all the Committee’s Reports and the Government’s Responses.
There is also a link to the Committee’s website from the House of Commons website.
The website’s address is:

[Link]/intelligence/

95. We would also like to record our thanks to our Investigator, John Morrison, and to
the secretariat, under the Clerk Alistair Corbett, which supports our work. They are based
in the Cabinet Office for security reasons.

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CONCLUSIONS AND RECOMMENDATIONS

96. On the basis of the evidence we have taken this year, our conclusions are as follows:

A. We believe that if the Agencies are to have PSAs and SDAs then further work
needs to be undertaken in their development to ensure that they present realistic
targets rather than arbitrary constraints or limits. We are also concerned that the
Agencies will be over-controlled by agreements with different bodies. We will
continue to monitor the situation and will report again next year.

B. The Committee wishes to record the significant contribution that *** makes to
intelligence collection.

C. The Committee is concerned about the size of the planned write-off of between
£***–*** million that GCHQ is having to make in the next year for a developmental
SIGINT system that has only partly delivered the intended capability. We recognise
that developmental work is not always successful and that the Resource Accounting
system requires GCHQ to highlight the cost of capital equipment that cannot be
used again, but we believe that GCHQ must learn the lessons from this experience.

D. We are concerned that the GCHQ Resource Account for 2002–03 will be qualified
owing to the historical problems in the asset register. We understand that GCHQ is
taking steps to address the remaining problems but whether or not the “momentum”
described by the C&AG will be maintained is unclear. It would be a significant failure
of management if the Resource Account were to be qualified yet again.

E. We will continue to monitor the Agencies’ investment in IT systems.

F. The Committee is reassured that the three Agencies are ensuring that all staff
are fully aware of the law in relation to their work. We are aware that there is a risk
that in-house lawyers could be over-stretched, but we emphasise that the staff need
to be fully trained in this important area.

G. We believe that CSI Ministers are not sufficiently engaged in the setting of
requirements and priorities for secret intelligence, nor do they all see the full
capability of intelligence collection. We hope that the new system will require
Ministers to be engaged collectively and fully in setting the requirements and
priorities.

H. We remain concerned that not all CSI Ministers see all the JIC papers as a
matter of routine and therefore they do not necessarily see all the assessments that
they ought to see. We believe that they should and that this would then encourage
their further participation in the requirements and priority setting processes.

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I. We recommend again that more funds are made available to maximise UK

involvement in the *** programme. As we have previously stated, we believe that the
IMINT programme needs to be funded and tasked as a national asset through the
SIA and JIC, rather than by the MoD.

J. We welcome the formation of the Joint Terrorism Analysis Centre and will
monitor the role and outputs of the JTAC and report in due course.

K. Now that the SCOPE programme has both agreed requirements and sufficient
funding, it needs to start delivering working systems that improve
interdepartmental and Agency communications. We will continue to monitor the
programme and its impact on the intelligence community.

L. The Committee believes that, with the focus on current crises, the Agencies’
long-term capacity to provide warnings is being eroded. This situation needs to be
addressed and managed by Ministers and the JIC.

M. We welcome the improvements to FCO Travel Advice and recommend that the
FCO continually reviews it to ensure that the advice provides travellers and
residents with clear and accurate information.

N. We are concerned that Ministers are not fully briefed on counter-proliferation

work but we have been told that the new official committee structure will ensure the
closer involvement of Ministers. We would welcome this. However, we believe that
there is a need for greater clarity as to the ministerial responsibility for cross-
departmental co-ordination of counter-proliferation policy and work.

O. It is impossible at the present moment to make any definitive statements about

the role of intelligence and the situation in Iraq. Whilst the Committee has been
briefed, we intend to examine in more detail the intelligence and assessments
available and their use. We will report when our inquiries have been completed.

P. The Agencies are now faced with either funding important Information
Assurance programmes from the SIA or delaying the work until other funding is
made available. This is unacceptable.

Q. A long-term solution has not been identified, neither has any funding been
allocated for the provision of the next generation of secure communications systems,
and we recommend that the Security and Intelligence Co-ordinator takes this
matter forward.

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FUTURE PROGRAMME OF WORK

97. Over the course of the next year, we shall continue to pursue the issues identified
elsewhere in this Report, including:

• Iraq;

• the Joint Terrorism Analysis Centre;

• Counter-Espionage;

• GCHQ’s New Accommodation Programme; and

• the new JIC Requirements and Priorities system and Ministerial involvement.

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ANNEX A

THOSE WHO HAVE GIVEN ORAL EVIDENCE

MINISTERS
Rt. Hon. Jack Straw, MP – Foreign Secretary
Rt. Hon. David Blunkett, MP – Home Secretary
Rt. Hon. Geoff Hoon, MP – Defence Secretary
Rt. Hon. Clare Short, MP – Secretary of State for International Development

OFFICIALS
CABINET OFFICE
Sir Andrew Turnbull, KCB CVO
Sir David Omand, KCB
John Scarlett, CMG OBE
Andrew Pinder
Other officials

SECRET INTELLIGENCE SERVICE

Sir Richard Dearlove, KCMG OBE
Other officials

GOVERNMENT COMMUNICATIONS HEADQUARTERS

Sir Francis Richards, KCMG CVO
David Pepper
Other officials

SECURITY SERVICE
Eliza Manningham-Buller
Other officials

FOREIGN AND COMMONWEALTH OFFICE

William Ehrman
Other officials

HOME OFFICE
Stephen Boys Smith
John Warne
Other officials

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MINISTRY OF DEFENCE
Simon Webb
Other officials

DEPARTMENT FOR INTERNATIONAL DEVELOPMENT

Richard Teuten
Other officials

DEPARTMENT OF TRADE AND INDUSTRY

Mike O’Shea
Other officials

NATIONAL AUDIT OFFICE

Martin Daynes
Bob Burwood

HM CUSTOMS AND EXCISE

Paul Evans

POLICE
Chief Constable Michael Hedges, QPM
Assistant Commissioner David Veness, CBE QPM

OTHERS

REPRESENTATIVES OF THE TRAVEL INDUSTRY

Keith Betton
Alan Flook

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