THE security service MI5 is seeking to recruit 800 extra spies to combat the heightened threat of Islamic terrorism since the London bombings of July 7.

Ministers are expected to approve the expansion plan, which will contribute to a doubling in the size of the spy agency by 2009. Staff numbers are expected to increase from 2,000 last year to nearly 4,000.

The bid for extra funding — thought to be for at least £50m a year — comes on top of a substantial increase in the security service’s budget, announced last year. That is being spent on 1,000 new staff, of whom 500 have been recruited. Much of the extra money will be used to expand the operations of G branch, the MI5 division that investigates international and Islamist terrorism.

Hundreds of spies, surveillance and desk officers will be recruited. They will include many candidates from ethnic minorities. The agency wants to hire “streetwise” young Muslim men who are capable of infiltrating groups of Islamic hardliners.

Security sources say the threat from Islamic terrorists is as great as ever it was. At least five suspected terror cells are being monitored by police and MI5. The cells are said to be at various stages of planning independent attacks here and abroad.

Charles Clarke, the home secretary, hinted at the scale of the threat last week when he said he was deeply concerned about information he was receiving in his daily briefings from MI5.

He said the security services had already foiled two “plots” since the July bombings. One is the subject of court proceedings.

Much of the new money — which would be available in April — will be used to expand MI5’s new regional offices.

The size of MI5’s budget is a state secret, but it is thought to have been about £200m last year. The details of the new bid are contained in a “business case” submitted by Eliza Manningham-Buller, director-general of MI5, to Clarke soon after the London bombings.

Her arguments are likely to be bolstered by evidence that lack of resources undermined MI5’s surveillance work ahead of the July 7 attacks.

Mohammad Sidique Khan, the ringleader, was placed under temporary surveillance by MI5 last year, but escaped detection because the security service decided after “a quick assessment” that he was not a direct threat.

Whitehall officials said at the time MI5 simply did not have resources to watch everyone who cropped up on the edges of their investigations.

MI5 wants to expand its counter-espionage service as well as boost its efforts to combat terrorism. Officials say there is a particular threat from the Chinese foreign intelligence service, which is increasingly targeting British business and high-technology security industries.

Special Branch officers say recent delegations of Chinese officials to the Home Office, Scotland Yard and some Ministry of Defence establishments have included undercover intelligence officers.

A senior Home Office official said he could not discuss details of MI5’s funding bid. He said a decision was not expected until later this month. But an insider said there was little resistance in Whitehall and ministers were supportive because of the scale of the threat. “We are talking about an enormous number of new spies,” he said.

“This will be a really huge increase and managing it will be quite a challenge.”

The agency has started a recruitment drive by advertising for junior staff and middle managers in the national media and women’s magazines. About 90% of applicants apply direct via its website.

Manningham-Buller is expected to make her case at a meeting of the parliamentary intelligence and security committee before Christmas.

The committee, chaired by Paul Murphy, the former Northern Ireland secretary, has just started an examination of the intelligence in the weeks leading up to the July 7 and July 21 attacks. It aims to establish why MI5 had no warning that an attack was being planned.

The committee also wants to know why the agency reduced its “threat assessment” in the month before the attacks, suggesting to ministers that Al-Qaeda had neither the intention nor the capability to launch operations in Britain.

David Davis, the shadow home secretary, said the July 7 bombings had exposed the lack of surveillance capacity in MI5. “I hope they get these new resources. There is certainly a need for an increase in capability,” he said.

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