MI5 and police are in dispute over which organisation is to blame for mistakes that left Mohammad Sidique Khan free to lead the 7/7 bomb attacks.

The Times has been told there were serious “communications issues” between West Yorkshire Police and MI5, which meant that proper monitoring of Khan’s activities never occurred. The two bodies differ strongly over what was known about Khan and who was responsible for watching him after he was identified as an associate of known terrorists. MI5 is adamant that it passed information about Khan to the West Yorkshire force’s Special Branch in mid2004.

West Yorkshire Police have refused to comment but a Panorama documentary this week claimed that the force was neither asked about Khan nor informed that he was a potential terrorist suspect. The contradictory accounts will be the key issue for the fresh inquiry into 7/7 that the Prime Minister has asked the Intelligence and Security Committee (ISC) to conduct.

Senior figures in MI5 question whether the ISC, a group of senior parliamentarians appointed by and answerable to Mr Blair, is the best tribunal for that inquiry. Ithas been criticised as secretive, lacking independence and insufficiently inquisitorial.

Concerns about the handling of intelligence about Khan were revived this week after five men were jailed for life for plotting to build a 1,300lb fertiliser bomb for an attack on a nightclub or shopping centre.

Khan and Shehzad Tanweer, another of the 7/7 bombers, had been photographed, bugged and followed by surveillance teams watching the fertiliser bomb plotters in February and March 2004.

Khan’s name was logged twice as the owner of a mobile phone used to call the bomb plotters and as the driver of two cars in which he travelled to meet them. Khan, from Dewsbury, West Yorkshire, had also attended a terrorist training camp in Pakistan with some of the plotters in July 2003.

After the fertiliser conspirators were arrested, Khan and Tanweer were placed on a list of peripheral figures to be subjected to further investigation or monitoring.

The Times understands that after frontline surveillance teams were diverted to another big terror operation in June 2004, information about Khan was passed to West Yorkshire Police.

The intelligence service believed that Khan was involved in petty fraud to raise money for jihadi groups overseas and that that was a matter to be dealt with by police.

But no action was taken to monitor Khan and he went on to plan and carry out the attacks that killed 52 people in London in July 2005.

When the ISC conducted its first inquiry into 7/7, it was told by MI5 that it passed information about Khan to West Yorkshire. Officers from the force were not called to give evidence to the committee but they did submit documents.

In its first report in May last year, the committee concluded that “more needs to be done to improve the way that the Security Service and Special Branches come together in a combined and coherent way to tackle the ‘homegrown’ threat”. A student acquitted of involvement in the fertiliser bomb conspiracy said yesterday that he abhorred terrorism. Nabeel Hussain, 22, told Sky News that the men convicted of the plot had “wasted their lives” and that he felt pride in being a British Muslim.

Times Recommends

• DIY video helps the WI get to grips with sex
• Artists urge nation to save Titians
• Go home, Iraqi leader tells Britain