Charles Clarke also admitted that the Government was considering whether to create a new offence of acts preparatory to terrorism to bring more suspects to justice. Mr Clarke said that he thought that it was likely that only a handful of terror suspects would be liable to house arrest under his plans for control orders.

But it is his remarks on the justice system that will fuel most controversy.

Mr Clarke said that he was not very keen on the adversarial system, in which prosecution and defence lawyers compete to persuade a jury of a person’s guilt or innocence. He would be willing to look at other systems to deal with terrorist cases. His comments come a year after David Blunkett, his predecessor, suggested non-jury courts for handling terror trials.

In his first appearance before the Commons Home Affairs Select Committee, Mr Clarke admitted that the idea would be controversial and constitute a huge shift in the way the legal system operated. “I am not an absolute fan of the adversarial system of British justice by comparison with other methods we have,” he said. “I would be prepared in due course to look at some other system that could work in this area (terror cases).”

He added: “Any change in that area would be absolutely enormous. I would be prepared to look at that in the round. It would require a massive shift and very wide consultation.”

Mr Clarke admitted that he might run into opposition from within the legal profession but added: “I would not call them vested interests. I would call them principled lawyers.”

The Home Secretary said that under his plans for control orders to deal with terrorist suspects who could not be brought to trial, only a handful would be subject to house arrest.

“But they are dangerous people; we would be putting our security at risk by letting them lose untrammelled.”

However, ministers are to redraft plans for powers to hold terrorists in their own homes without charge, after advice from Whitehall lawyers that they face a fresh defeat in the courts.

A Bill to be published in the week of February 25 will include penalties such as house arrest, tagging, curfews and restrictions on movement.

The legal advice increases pressure on Tony Blair, who is already facing opposition from MPs, peers and civil rights libertarians to the plans to hold British citizens as well as foreigners merely “on suspicion.” Mr Blair, and other ministers, have also been persuaded by the Attorney-General that the sanction would probably be successfully challenged in the courts.

Asked whether the failure to find weapons of mass destruction in Iraq had undermined public confidence over terrorism issues, Mr Clarke said that the events had led to “a scepticism about the quality of intelligence on important matters”.

He also told MPs that it was possible that evidence from telephone taps would be used in criminal trials in the future.

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