TERRORISTS will be offered “supergrass” deals as part of the Government’s drive to tackle extremist attacks and foil further bombings in Britain.

Islamic militants, including those charged with the July 21 attempted London bombings, could have their sentences cut by two thirds for informing on members of terror cells and the attack masterminds.

They would also be offered places on witness protection schemes and have their identities concealed in court. The move was disclosed by senior Whitehall officials as Charles Clarke, the Home Secretary, published a package of anti- terrorist measures and seven Algerian men were arrested in London and Manchester on the ground that they were threats to national security.

The centrepiece of the Bill is a proposal to give police the power to hold terror suspects for up to three months without charge. However, it appears that Mr Clarke himself is not convinced about this part of the Bill. A draft letter from the Home Secretary to opposition parties read: “I think the case for some extension is clear though I believe there is room for debate about whether we should go as far as three months and I am still in discussion with police on this point.”

The new Bill also includes laws to clamp down on extremist Islamic bookshops and creates a new crime of glorifying or exalting terrorist acts.

A senior Whitehall official said: “If information from a terror suspect already in cus- tody helped to prevent another atrocity then I believe the public would accept a lighter sentence.”

The move would allow police to carry out “intelligence-only” interviews that could not be used subsequently against the person giving the information.

Intelligence agents, police and prosecutors want to employ the same tactics that are used to persuade crime families and drug dealers to inform on their associates.

Senior Whitehall figures do not believe that new legislation will be needed to allow them to arrange these plea-bargain deals with suspected terrorists.

The plan reflects a proposal by Lord Carlile of Berriew, QC, the Government’s anti-terror law watchdog.

He said that a formal supergrass system was needed because there was disappointment at the low level of information provided by terrorists arrested in the UK, and there should be an opportunity to offer lighter sentences in return for the provision of “potentially life-saving information”.

Lord Carlile disclosed that a Home Office official had offered foreign terrorist suspects held in Belmarsh jail, southeast London, the opportunity to give information to police and MI5.

The Government believes that a new generation of supergrasses could help to secure convictions, foil future attacks, provide valuable information on the nature of Islamic extremists in the UK and disrupt their organisations.

Suspects would be offered an intelligence-only interview at which their lawyers could be present. Detainees would be promised that their information would not be recorded, passed to investigators or disclosed to other defendants. Anything said in these meetings would not be revealed unless the suspect lies or later changes his or her evidence given in court. In exchange for valuable information, the trial judge would be urged to give a much reduced prison sentence.

While MI5 and the police cannot guarantee a reduced sentence in any plea bargain, prosecutors will ensure that the trial judge knows how vital the suspect’s information has been to the authorities.

The Government is also ready to offer witnessprotection programmes, including new identities and safe houses, to those who provide crucial intelligence on terror plots. It would also be willing to offer a foreign terrorist suspect who gave crucial information the right to settle in the UK.

Foreign terrorists have had their sentences cut abroad in return for offering to give evidence for the prosecution in cases here. Whitehall officials who support the idea have made clear that, if information proved to be false, supergrasses could be returned to court for sentences to be increased.

Prosecutors want to be involved in questioning of terrorist suspects early in investigations so that they can advise police and the suspect during “intelligence-only” meetings.

British officials have been in touch with their opposite numbers in the US where deals on substantial sentence reductions are offered to terrorists.

US, Canadian and Australian investigators have told UK investigators that they are “astounded” that Britain still refuses to allow intercept evidence from bugged telephone calls to be used in prosecutions.

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