The Security Service, headed by Dame Eliza Manningham-Buller, is to spend the bulk of the additional cash on recruiting and training another 200 intelligence officers to cope with what is recognised to be a rising threat from home-grown terrorists.

The intensive recruiting programme will raise staffing levels to 3,200 by 2008, with more than 70 per cent devoted to counter-terrorism operations.

The total number of police officers dedicated to counter-terrorism is just over 1,000, made up of officers from the Scotland Yard Anti-Terrorist Branch and national Special Branch forces. The expansion of MI5’s counter-terrorist efforts has transformed the agency into an organisation that dedicates the vast proportion of its funds and manpower to tackling the terrorist threat.

Security sources told The Times that MI5 was engaged in the biggest counter-terrorist surveillance operation in its history because of the increasing emergence of a radical element prepared to resort to terrorist attacks in this country.

MI5 was already in the process of increasing its workforce from 2,000 to 3,000 by the end of 2008 and was attempting to bring the date forward to 2007 because of the increase in demand for intelligence to pre-empt any further terrorist attacks such as the July 7 suicide bombings in London last year.

However, the agency put in a bid to the Treasury last autumn for more money, arguing that extra cash would guarantee additional trained covert surveillance experts on the streets. Last month Gordon Brown, the Chancellor, announced in his Pre-Budget Report that an extra £135 million had been allotted to the intelligence services, the police and relevant government departments for counter-terrorist operations. A week ago The Times published a report highlighting concerns among senior counter-terrorist police officers that they were not getting enough of the extra £135 million to recruit more officers, and complained that the biggest proportion was being given to MI5 and MI6.

MI5 certainly appears to have benefited significantly from the latest Treasury handout because an immediate decision was made to boost the planned total workforce to at least 3,200.

Yesterday, Crispin Black, a former government intelligence analyst and author of 7-7 What Went Wrong, said that it was “eminently sensible” to give a large proportion of the extra money to MI5. He said: “The reason why MI5 didn’t get Mohammad Sidique Khan (the leader of the suicide bombers) before July 7 was because it had to prioritise about who to follow (during a previous counter-terrorist operation when Khan’s name came up; he was not subjected to long-term surveillance because he was considered to be on the periphery of the suspect terrorist plot).”

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