As a result, MI5 failed to put him under surveillance and his plans to become a suicide bomber remained undetected.

Mohammed Sidique Khan, a 30-year-old teaching assistant from Dewsbury, West Yorkshire, who killed six other passengers when he blew himself up on a Tube at Edgware Road, was the subject of a routine threat assessment by MI5 officers after his name cropped up during an investigation in 2004.

That inquiry focused on an alleged plot to explode a 600lb truck bomb outside a target in London, thought to be a crowded Soho nightclub.

This weekend, as the death toll from the terrorist attacks rose to 55 and Scotland Yard released the first CCTV image of the four bombers, it emerged that MI5 found out in 2004 that Khan had been visiting a house used by a man who had met one of the suspected truck-bomb plotters. However, MI5 officers subsequently decided that because Khan was only “indirectly linked” to one of the bomb suspects he was not considered a risk. The intelligence service took no further interest in him.

The government official said a “quick assessment” had been made of Khan at the time. Like hundreds of others linked to the inquiry, he was judged to be “on the periphery” of the suspect cell’s network.

“You made quick assessments of them to decide whether or not they were a threat. None of the other people were a threat, including Khan,” the official said.

He conceded that the agency might be accused of being at fault if it turned out that it had overlooked a terrorist suspect. “MI5 is fair game at the moment,” he said. “We’ve only got finite resources. You can only concentrate resources on those people who are a direct threat to national security.”

He said extra funding to pay for 1,000 more MI5 staff, which was agreed last year, had only just started coming on stream.

The decision behind the assessment is now being urgently reviewed in the light of Khan’s role in the London attacks and further claims about his suspected terrorist background.

Two American intelligence officials said last Friday that Khan was known to Mohammed Junaid Babar, who pleaded guilty in June 2004 to providing material support to Al-Qaeda.

Babar has admitted setting up a training camp for Islamist terrorists in Afghanistan. He has told prosecutors that he worked to aid a plot to blow up pubs, train stations and restaurants in Britain.

Last Thursday he identified a photograph of Khan as that of a man he had met in Pakistan, according to an American official. Scotland Yard is trying to establish whether any of the suicide bombers were radicalised in religious schools in Pakistan.

Explore UK News

• Science News

• Crime News

• Education News

• Health News

• Scotland News

Times Recommends

• Savers left in limbo as Icesave freezes deposits
• Kennel Club changes breeding rules
• Passengers triple risk of fatal crashes