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Grand Committee

Monday, 21 January 2013.

Intelligence and Security Committee: Annual Report 2011-12

Motion to Take Note

3.30 pm

Moved by The Marquess of Lothian

That the Grand Committee takes note of the Intelligence and Security Committee Annual Report 2011–12.

The Deputy Chairman of Committees (Baroness McIntosh of Hudnall): My Lords, we are hoping that the annunciator will be changed shortly so that we are not distracted by proceedings in the Chamber. I remind noble Lords that in the event of a Division in the Chamber, the Committee will adjourn for 10 minutes from the sound of the Division Bell.

The Marquess of Lothian: My Lords, the core work of the committee upon which the noble Lord, Lord Butler of Brockwell, and I have the honour to represent your Lordships’ House covers an important area of national interest, not least because of the amount of public money that the agencies consume each year, something over £2 billion. The nature of the work they do, and what they spend the money on, must, of course, for the large part, remain secret. However, the Intelligence and Security Committee ensures that there is parliamentary oversight of this work, and it is right that we have, as we have today, the opportunity to debate our findings.

The committee has had another busy year under the firm leadership of our chairman, Sir Malcolm Rifkind MP, to whom I readily pay tribute, as I do to the immensely hard-working staff of the committee, without whom our detailed and often complex scrutiny would not be possible. I would also like, at this early stage, to record my continuing admiration, gratitude and respect for the almost always unsung dedication and professionalism of those who serve our country in our intelligence and security agencies—SIS, MI5 and GCHQ. We owe them much as a country, and I am glad to pay tribute to them.

This annual report covers a wide range of issues, and we have made a number of recommendations. I shall, in the time available, concentrate on a few of those. First, resourcing—the agencies received a relatively generous settlement in the last spending review of 2010, with what is known as a flat cash budget, which nevertheless represented a significant real-terms cut over the four-year period. With a combination of pay freezes and concerted efforts to control other costs, the agencies are currently coping with this while apparently preserving front-line capabilities. All the same, the settlement commits the agencies, both individually and collectively, to achieve significant savings before 2015. The committee agrees that the efficiency savings

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need to be made, wherever possible, in administration and related areas. However, we are not convinced, as we say in our report, that sufficient progress is being made towards making them, and the Government have yet to convince us that the agencies will meet the targets that they have been set. If they do not, the agencies could be forced to cut front-line capabilities, and that, as I am sure your Lordships agree, would be extremely worrying. I hope that the Minister can assure us that the axe will not end up falling on the front-line capabilities that are so badly needed to protect our national interests.

The second area, also related to resources, is the ability of the agencies to respond to unexpected events. We have seen—here I include Defence Intelligence, whose role was, and continues to be, crucial—how the agencies had to divert resources to the events of the Arab uprising, which is a subject to which I will shortly and briefly return.

The committee is concerned that, inevitably, these resources will have to be switched from other areas. In these straitened times, particularly for Defence Intelligence which has suffered round after round of cuts, our ability to maintain sufficient coverage of all the areas of the globe—the importance of which has been graphically and painfully illustrated in Algeria over these past few days—is becoming increasingly fragile. Yet our agencies need to be able to respond to events anywhere and at any time. We may be able in the short term to plug the gap but only by robbing Peter to pay Paul. If we do not examine this more closely, sooner or later we will be caught out—if that has not already happened.

More generally, we welcome the fact the central intelligence structures are now aligned beneath the National Security Council. However, from past experience, we are concerned to ensure that analytical judgments and policy recommendations remain separate when advice is presented to Ministers. As we have seen in the past, it has been easy for this distinction to become blurred and it is crucial that it does not do so in the future.

Earlier I referred to the agencies’ swift and commendable response to the Arab spring—or, as I prefer to call it, the Arab awakening. That presented a real challenge to the intelligence community which had to reprioritise quickly and redirect its resources towards the region. Of course, it is often impossible to predict such events. However, the question remains as to whether, once events began to unfold, the agencies should have anticipated the possibility that the unrest would quickly spread across the region and should have recognised the Islamist nature of much of it and the crucial distinction between national and universal Islamism, which is of such importance to our security. We are seeing this clearly in what is happening in the Maghreb and the Sahel and potentially even more dangerously, in Syria.

Although the capability of al-Qaeda and its affiliates has been weakened in Afghanistan, in the tribal regions of Pakistan and increasingly in the Arabian Peninsula and Somalia, it has demonstrated that it is still resilient, capable of regrouping and recruiting elsewhere, of mounting an attack on western interests and of posing

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a serious terrorist threat to the United Kingdom and its citizens. This danger needs to be further and urgently pursued. Above all, this demonstrates the risks inherent in drawing down effort on lower priority areas, and of the importance of the agencies, working with allies where necessary, maintaining global intelligence coverage.

In Northern Ireland we welcome the intention of the Security Service to maintain its resources at current levels. From my own experience, this is a ball we can never afford to take our eye completely off.

Finally, there is cybersecurity which remains the most rapidly growing threat that we face. Every day citizens and businesses in this country face attacks on their computers and networks from criminals, hacktivist groups—that is spelt with an “h”—and state actors, ranging from actions which cause mere irritation to the compromise of financial details and, at the most extreme end, the theft of intellectual property and sensitive national security material. This is a threat to the security and prosperity of the United Kingdom and, in its report, the committee has welcomed the seriousness with which the Government have addressed this. The additional resource—£650 million over four years—is a significant sum in these straitened financial times.

While the committee’s interest has been primarily in the 20% of more sophisticated attacks where national security has been affected, the wider issues remain the same. We have noted the work of the Communications-Electronics Security Groups and the Centre for the Protection of the National Infrastructure, which are increasing their efforts to educate government and business about the vulnerabilities and weaknesses of their systems and how improving behaviour will strengthen defences and benefit the entire country at the least cost. However, it is more than two years since the Government announced increased funding for work against cybercrime. While there has been some progress in developing new capabilities, this does not appear to have been as swift as might have been expected. In a fast paced field, where new technologies are emerging all the time, we cannot afford delays in our national response. The committee will keep this issue under close review.

There are many other important matters mentioned in our annual report, including counterterrorism work, staffing and diversity in the agencies, and access to communications data—to name but a few—which other noble Lords may wish to raise. I will now turn to broader issues. When we held this debate last year, the Government had just published a Green Paper covering reform of the Intelligence and Security Committee and increased protection for intelligence material involved in civil cases. Since then, this House has debated the Justice and Security Bill, which is currently being considered in another place. I will not repeat the arguments that were deployed in Committee and on Report in your Lordships’ House, but there are one or two areas that I wish to raise briefly.

As noble Lords will be aware, Part 1 of the Bill concerns reforms to the Intelligence and Security Committee itself. It is intended to formalise many of its practices, which have evolved beyond the limitations

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of the statute under which the committee was originally established in 1994, and gives the committee greater powers to access information held by the agencies. It will also make clear the committee’s responsibilities to Parliament as well as to the Prime Minister, which have not always been clear in the past, and underline that it is an independent committee, which has also not always been clear in the past to outside observers. These are important changes that originated from within the committee and we are pleased that the Government and others, both in your Lordships’ House and, I understand, in another place as well, have in principle accepted them as being necessary.

However, there is more work to be done to bridge the final remaining gaps between the committee and the Government and I hope the Minister can reassure me that agreement on these issues is near. I think we are all agreed on the need to strengthen the committee’s link to Parliament but there are implications from formalising this relationship. While I understand the Government’s nervousness around such issues as parliamentary privilege, can the Minister confirm today that the work of the committee will be adequately protected in future?

Secondly, for the first time the committee is being given explicit powers to investigate operational matters, subject to certain clear provisions. These are that the matters are agreed between the Prime Minister and the committee as being retrospective—that is, not part of any ongoing operation—and of significant national interest. These principles are not controversial and the committee has no intention of becoming involved in the day-to-day operations of the agencies.

However, we must ensure that the legislation does not inadvertently tie the committee’s hands. After all, the committee often investigates matters relating to operations, sometimes even at the Prime Minister’s request; its report into the 7/7 bombings is a case in point. It would be a significant step backwards if the legislation did not allow for such inquiries in future.

My final point relates to the resources available to the committee. Our admirable staff provide all our research, analysis, briefing and drafting in-house. If the committee is to be able to continue its work, let alone take on the increased role that the Bill envisages, the Government must ensure that we have adequate support to do so. Our resources are meagre compared to those of our overseas counterparts, as noble Lords who have been on the committee and have visited other countries will readily agree, I am sure. They are also meagre in comparison with inquiries such as that on the detainees or the Iraq inquiry, the report of which we still await, or indeed of the Committee on Climate Change, to name just a few. If the Government are serious about supporting the measures in the Bill, this committee must be funded correctly and adequately so as to be able to carry out its responsibilities properly in the future.

My very last point on the Justice and Security Bill is about the necessity of introducing closed proceedings in civil cases where the protection of national security material is involved. This was debated at length in your Lordships’ House and I am pleased that the core of the Government’s proposals has survived that

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consideration. The reputational damage to our agencies of legally unjustified financial settlement with those questionably claiming mistreatment cannot be allowed to continue. The public perception is that the agencies have something to hide and we should not allow the situation to continue where a judge is unable to rule on such allegations. In addition, our relations with allies will suffer if we are unable to guarantee that we can protect their secrets, especially as we expect the same when we share our intelligence with partners overseas.

It is been an extremely busy year for the intelligence agencies, primarily due to the burdens placed on them by the Olympic and Paralympic Games. That these events not only passed off without incident but were such a widely acknowledged success was in no small measure due to the enormous behind-the-scenes efforts of the agencies to ensure that terrorists did not take advantage of the situation. This took a significant effort on the part of the Security Service in particular, and we have noted the disruption that staff had to endure with long or unsocial working hours and bans on leave—and this was all in addition to the range of their other work that continued as normal.

The agencies do not often get the public recognition they deserve, so it is important to put this on the record when the opportunity arises. They are a credit to this country and we owe them all a debt of gratitude. I commend the report to the Committee and I beg to move.

3.47 pm

Baroness Hamwee: My Lords, when I went to see the latest Bond film, “Skyfall”, there were two Members of your Lordships’ House in the audience. I think we both found that the least credible part of the film, which was a high hurdle, of course, was the active executive role taken by the chair of the Intelligence and Security Committee. That is probably the limit of my expertise on the subject, certainly compared with today’s speakers and indeed with other noble Lords in the Room, so I hope that noble Lords will forgive any naivety in my comments.

On reading the report, although this is not a criticism of the report itself, the writers or the committee, I would have been pleased if some of the gaps had been filled. I am not talking just about the redactions, although on those I did wonder about the process. Does the committee advise the Prime Minister that certain matters are for his eyes only, as it were, because as we discussed during the passage of the Justice and Security Bill, responsibility for security is a matter for more than the agencies? Indeed, much reference is made in the report to what is called the wider intelligence community. It appears from the report that the National Security Council, with a membership of Cabinet Ministers, joins things up across government. The report states:

“It is evident that the NSC has increased further its status and priority, and we are reassured that the requirements of the NSC have been assimilated by the intelligence community”.

I am intrigued that membership of the Joint Intelligence Committee is not quite aligned with that of the NSC, which includes the Secretary of State for Energy and Climate Change. However, DECC officials are not permanent members of the JIC. The events of the past

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few days have confirmed the relevance of that. Perhaps the issue will soon be water, but that could be a matter for another debate. The JIC, on the other hand, includes officials from BIS but the Secretary of State for Business is not a member of the NSC, which is interesting given the problems of cybersecurity to which the noble Marquess has just referred.

The impact of the NSC on the intelligence community—to pick up that reference—is one thing but what is important above all is its impact on outcomes. The report’s very first recommendation concerns the distinction between policy implications and analytical judgments. Again, this has already been mentioned and the Government agree with it. It cannot be easy to maintain that distinction or to avoid blurring the line between the operational and the strategic. Two of the quotations from the evidence from the Foreign Secretary which are contained in the report were particularly interesting on this. He said:

“We task them all the time”.

Then, acknowledging the importance of operational independence, he goes on to say that,

“there is a process of discussion. I mean, the weekly discussions that I have with the Security Service are about where they are focusing their resources and particular operations that require that resource and questions I can ask about the issues that I see that need to be addressed and how they are doing them. So it’s a different sort of accountability”.

Accountability is an interesting word there, because it is moving towards the Executive. I am not saying that there is anything wrong in that involvement or that I am critical of it, but I thought that this highlighted the point. The noble Marquess, Lord Lothian, has asked the Minister to confirm that resources will remain available for the front line, which in my mind raises the question of who is responsible for the allocation of resources within each agency by each agency, and how much they should be told by the Government where resources should be allocated.

As I read the report, the agencies are increasingly collaborating for operational reasons as well as for efficiency. The Government’s response stresses the importance of a tri-agency approach to conducting and supporting counterterrorism investigations. No doubt the debate about having separate agencies and the demarcation lines is a very old one, but I wonder whether the time is coming for it to be revived and for a reflection on where the demarcation lines should be, as the world changes and we become more of one global whole.

One of the changes of course is the agencies’ increasing dependence on IT. I was not surprised to read of the difficulties of retaining talented people—to whom one must pay tribute, not only in IT but across the piece. This is not a new issue in the public sector: the attractions of the private sector have taken, for example, engineers and planners out of local government for years. It means making the job attractive, not only in terms of salary but in other ways. There is talk of recruitment. I have been on to the websites and played with what is there. However, I do not get much of a sense of what the imaginative and innovative methods are to which the Government refer—without fleshing it out—which would attract possible applicants to

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look for jobs with the agencies and get to the point where they might try to take the intelligence test, if I have used the term correctly.

Turnover within the agencies seems high. I assume that there is an analysis, either within each agency or by the committee, of the levels of seniority where there is high turnover and the reasons for it. Is absence monitored? Sickness levels are often a very good indicator of what is going on beneath the surface. This information is in the public domain but, as regards discussing this area in public, taking evidence from those who can give it is just the sort of thing that could be considered—an issue that I raised during the passage of the Justice and Security Bill—not at one stage removed, as we are today. I readily acknowledge that there are difficulties when one moves from the general to the particular in this area but, for example, redundancy payments are indeed high, as the report mentions. This makes me wish to ask—but I cannot ask or listen to the question being asked—whether there are false economies in making high redundancy payments if that means recruiting a large number of more junior employees.

Diversity, as is also recognised, is an issue in recruitment and, perhaps, retention—I am not clear about that. Are the nationality requirements really such a problem for diversity? How much effort is being made to learn from other sectors? Is there secondment to and from the agencies and other sectors? Presumably, that is not entirely impossible? I would like to think that the committee has been told more than:

“Work is in hand to identify a sustainable package of measures to tackle the situation”.

However, I return to the “what?”. The proportion of spend on counterterrorism brings one up short. I noted, too, mention of home-grown self-starters and lone actors. The sections on the Prevent strand of the strategy reminded me of the difficulties in another area—drugs. This is all about mindsets, and I wonder whether there is any read-across that one can make. I should be interested to know whether the ISC was content with its recommendations on this. I wonder, too, if it was satisfied with the Government’s response to the section on torture and cruel, inhuman or degrading treatment. It seems that nothing is immune from being turned into an acronym. The report refers to the risk of being linked to such activities. I do not know whether it is only my reading of the Government’s response but it carefully does not address the difficult area of “condoning” such treatment—if that is the right word for not asking all the questions or ferreting away at investigations that might reveal things that one might not want to know; and yes, I have read the consolidated guidance and note the role of Ministers in this. Perhaps that is for another day.

It is clear that the committee’s oversight is continuous and vigorous. Meetings are not everything but I note that the committee met 44 times in the year—almost once a week. As the committee and the noble Marquess, Lord Lothian, has said, the real test is our response to the unexpected. Perhaps the events of the past few days remind us that behind this is the question of what is done to limit the unexpected. I pay tribute to the

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work of the committee as well as of the services. Scrutiny is by no means merely passive and reactive, and this report shows that.

3.58 pm

Lord Butler of Brockwell: My Lords, it has been a privilege to serve for a second year as one of your Lordships’ two representatives on the parliamentary Intelligence and Security Committee, along with the noble Marquess, Lord Lothian.

The intelligence and security agencies of the state continue to have a high profile in government. New requirements and threats arise, which the intelligence agencies have a vital role in addressing. As the noble Marquess, Lord Lothian, said, technology develops very fast, providing new tools both for the agencies and for those who threaten us. New issues arise in striking the balance between transparency and secrecy, and between the effectiveness of the agencies, on the one hand, and the freedom of individuals on the other. It is evidence of the prominence of these issues that a major element of the programme of this parliamentary Session is the Justice and Security Bill as well as pre-legislative scrutiny of the proposed legislation to require mobile telephone and internet providers to retain data for the use of the intelligence and law enforcement agencies. The Intelligence and Security Committee has been, and is, closely involved in all these matters.

As the ability of the state to intrude on the privacy of citizens has increased over the years, so successive Governments and Parliament have rightly put in place means of scrutinising the activities of the agencies to provide protection against abuse. Since the activities of the agencies have to be conducted in secrecy if they are to be effective, so the scrutineers on behalf of the public have to be admitted within the ring of secrecy. What is more, if the public are to have confidence that they will have effective protection, they also have to have confidence in the independence and integrity of the scrutineers.

Our legislation gives judges the duty to enter the ring of secrecy and ensure that the intelligence agencies are operating within the constraints of the law. Since 1994 it has given the parliamentary Intelligence and Security Committee the duty of exercising a more general scrutiny on behalf of the public and Parliament. The judicial commissioners—and we have two very distinguished former commissioners present today—have carried the confidence of the public. However, the Intelligence and Security Committee has appeared to be the creation of the Government and, because it operates within highly constraining legislation, it has carried less public confidence.

I believe that this criticism of the committee has been largely unfair. Although the ISC has not had the power to require information from the agencies, the track record of the committee in protecting secrecy has given the agencies increasing confidence to provide information fully and frankly to the committee. The committee’s scrutiny has extended well beyond the limits of policy, administration and expenditure—which were the limits on it set out in the 1994 legislation. In the Justice and Security Bill now before Parliament,

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the legislation is catching up with reality and carrying it forward by making the committee more genuinely a committee of Parliament and by giving it the power to require information from the agencies and not just request it.

Of the matters which the committee has examined this year and which are covered in the annual report, there are many which have had a high salience in public consciousness. Perhaps chief among these, as the noble Marquess, Lord Lothian, and the noble Baroness, Lady Hamwee, said, was the role of the agencies, police and Army in protecting the security of the Olympic Games, or perhaps I should say the security of the nation during the Olympic Games. Like others, the committee was worried last year that the Games would necessarily be such a preoccupation of the security agencies that they would open the way to attacks elsewhere. In the event, the actions which the agencies took to pre-empt and deter attacks were so effective that the efforts directly devoted to the Games themselves, although large, did not drain other areas of the resource to the extent feared, and protection in those areas remained in place. Overall, I echo the comments of others that that aspect of the Games, like other aspects, was a spectacular success.

Overseas, the greatest challenge to the agencies, in addition to the ongoing requirement to support our Armed Forces in Afghanistan and to monitor the breeding grounds of al-Qaeda terrorism, was the upheaval created by the Arab spring. As the noble Marquess, Lord Lothian, and the noble Baroness, Lady Hamwee, pointed out, recent events in Mali and Algeria have tragically demonstrated that overseas eruptions of this sort, even when they occur in areas known to be volcanic, are often unpredicted—and perhaps unpredictable—by intelligence, but they create a requirement for urgent action to catch up with events. The fact that such unexpected events have happened at various times in our history emphasises the need for the agencies to maintain at least some capacity in all areas where British interests are involved. Of all the agencies, GCHQ has the potential flexibility to respond quickly in such situations, and overall the committee was impressed by the rapidity and effectiveness of the response that it and the Defence Intelligence Service were able to make to the events in Libya.

Another area where the Government have been devoting substantial effort—and need to do so—is cybersecurity, as has already been mentioned. The committee has been monitoring the way in which the Government have been using the £650 million they devoted to the National Cyber Security Programme in the most recent public expenditure settlement. It appears that the publicity given to this issue, not least by the welcome initiative of the Foreign Secretary in holding the London Conference on Cyberspace in November 2011, has been effective in drawing attention to the danger that this form of espionage presents to the UK and in alerting companies to the need to take action to protect their commercial interests. Much more needs to be done, but within Government there are still only hand-to-mouth arrangements for funding the protective action necessary and the committee has had to repeat

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the recommendation it made last year that a more stable long-term funding mechanism is needed for this vital work.

Because of my personal background, I have taken a particular interest in the ISC’s work in looking at how the central machinery for handling and using intelligence has been developing. I think it is generally accepted that the establishment of the National Security Council, bringing the heads of the agencies to the top table with senior Ministers in planning the UK’s defence and security priorities, is a welcome development. I follow the noble Marquess, Lord Lothian, and the noble Baroness, Lady Hamwee, in saying that it also has its dangers, by bringing the purveyors of intelligence directly into contact with senior policymakers without the sieving mechanism that the country so wisely put in place in the form of the assessment staff and the Joint Intelligence Committee. It risks bringing the intelligence moths too close to the policy-making flame. That risk was increased by the fact that the operations of the Joint Intelligence Committee had become, as the National Security Adviser himself admitted to the ISC, a little “stately and formal”.

In this fast moving situation, particularly when British troops are engaged in active military operations, it is all the more important that policymakers have the use of immediate—but properly assessed—intelligence: the very purpose for which the Joint Intelligence Committee was established in the Second World War. It is therefore welcome that the new chairman of the JIC, Jon Day, who has extensive experience of assessment, has taken steps to make the assessment machinery more fleet-footed in meeting the day-to-day needs of senior Ministers, as well as producing longer-term assessments to meet the requirements of the NSC.

I will end with two more general remarks. First, it is striking how much the challenge of dealing with internationally based terrorism has had the effect of requiring all the agencies to work more closely together, as the noble Baroness, Lady Hamwee, noted. The work of detecting and pre-empting al-Qaeda attacks on the British homeland requires the co-operation of the Security Service, SIS and GCHQ as well as the police and, in some cases, military assets. I believe that they have responded to the challenge very well.

It would be idle to deny that tensions occasionally arise between the services, but on the whole they are rare. Would it be better if we had a unified intelligence service to deal with these interrelated threats? The noble Baroness, Lady Hamwee, hinted at this question. I think that the answer is no. As things are, each of our agencies and services brings to bear its own skills, traditions and roles, which are separate. As long as they work closely together, and the ISC both monitors and encourages the agencies in that area, they are more effective as a partnership than as a single entity.

That brings me to another point. Intelligence work has always raised ethical issues, and again the noble Baroness, Lady Hamwee, referred to these, but modern intelligence work, requiring extensive international co-operation, raises such issues acutely. Our intelligence and security agencies find themselves from time to time working with uncomfortable bedfellows. As the de Silva report brought out clearly in the Finucane

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case, agents who penetrate terrorist organisations inevitably sail close to the wind. But working with other Governments also brings our agencies into co-operation with those who may have different standards and different methods. It is therefore essential, as the noble Baroness, Lady Hamwee, said, that our agencies have clear guidelines about boundaries which they should not cross. I believe that the agencies and Ministers have given much attention in recent years to creating such guidelines. However, it would be foolish not to recognise that difficulties will sometimes arise, for example, when a partner at one moment turns out to be a rogue at another. This is just one of the many risks that members of our agencies and security forces have to run. In general, what I have seen as a member of the ISC and previously reassures me that we can have confidence in the ethical standards to which our agencies and security forces seek to operate.

The world in which we are living has all sorts of instabilities and dangers that are made greater by the power of technology in creating new and ever more potent threats. It is the job of our intelligence and security agencies to defend us against them without crossing lines that would infringe the very liberties they are there to protect. They have continuously to make hard decisions about priorities in using resources, and those resources are necessarily limited. The agencies welcome the scrutiny to which they are subjected because they know that it helps to keep them honest and defends them against criticisms which are unfounded or unjust. I believe that the Intelligence and Security Committee and the commissioners are necessary to that scrutiny and I am proud to take part in that work. I endorse everything the noble Marquess, Lord Lothian, has said about the contribution of the staff of the ISC and the need to give them the necessary resources as the committee’s work expands. I am very glad to support the noble Marquess in his Motion that the House takes note of the committee’s report.

4.14 pm

Baroness Taylor of Bolton: My Lords, thanks to the noble Baroness, Lady Hamwee, I have learnt something that I had not expected to this afternoon, which is that as a former chair of the Intelligence and Security Committee, I now need to see the latest James Bond film. Also as a former chair of the committee, I hesitated and wondered whether I should hover like a ghost from the past over this debate, but I could not resist taking part because it is sometimes good to have a degree of perspective, and the committee is still relatively new, and therefore I want to say a few words.

I congratulate and thank the two noble Lords who represent us on the Intelligence and Security Committee. When I was its chair, Peter Archer—Lord Archer of Sandwell—was a diligent member of the committee; we now have two Members of your Lordships’ House serving on it and I am sure that their contribution is very highly valued. It is an extraordinary committee. While it is not a Select Committee or a committee of Parliament, it is a committee of parliamentarians and probably works harder than any other committee of this kind. Mention has been made of the number of meetings it holds, but it is the intensity of many of those

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meetings and the degree of responsibility held by its members that are important. I am therefore happy to pay tribute and note with interest some of the phrases that have been used in connection with the legislation we have been talking about in the recent past actually catching up with reality in terms of the information coming from the agencies about operations or other areas. It is the case that this committee has a great deal of power and that it has exercised it informally, not least because the agencies want to have the confidence of the committee. Therefore, whatever the statutory situation is, I have always felt that the ISC has a great deal of power and holds great sway with the agencies. It has been important to see that develop, and it is interesting to hear how it is to develop in the future.

I should mention a word of caution about a theme that emerges time and time again, and that is the need for transparency. We need confidence both in the committee and in our agencies. There is a limit, as has been said, to the amount of transparency that can exist. If we emphasise transparency too much, we will lead people to believe that they can be told more than is the case, and sometimes we need a reality check in that respect.

I, too, would like to say a word about the success of the Olympics and Paralympics. As we have been told, there was much concern beforehand about what might happen and what the potential for disruption and danger was. The report states that this put “unprecedented pressure” on the agencies, and I can well believe it. I am glad that the report recognises the exceptional effort made by staff, which the noble Marquess mentioned in opening the debate. We all know that many real sacrifices were made. It was an intense summer for many people who, for example, lost their holidays or had difficulties if they had children. This affected not only the agencies but MoD staff and, perhaps, more widely throughout Whitehall. Although I am sure that many of those individuals felt that it was worthwhile, there were real pressures and we should pay tribute to them.

On the other hand, the report recognises that the preparations that were made to anticipate and avoid difficulties during the Olympic period meant that risks were taken in certain other areas. This is a matter that we should not dwell on but perhaps not push to one side because there are real and serious potential problems here. Mention has been made of resources. We all know that times are difficult. We also know that no Government want to or can take risks with national security, which must always be a priority. However, I am concerned, as are many other people, about the pressures being placed on the single intelligence budget and I fear that we are potentially getting to a critical period in terms of those pressures and problems. We saw, as I mentioned, that the pressures resulting from the preparations for the Olympics meant that squeezes were made and gaps created elsewhere. The noble Lord, Lord Butler, mentioned the increasing and intensifying danger of cyber attack and how cyber security needs more attention and is more of a challenge.

We have seen how events as they are always called, such as the Arab spring or awakening, which is probably more appropriate, are a real challenge for the intelligence

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agencies. The report states clearly that there were gaps and problems. We are seeing it at the moment so far as Mali is concerned; again, clearly, there are problems. These are all unanticipated pressures. Who knows what the next pressure will be: something in the Pacific or somewhere else? The report expresses clear concerns about the extent of global coverage that we have. Yes, we have got to work with allies, to share intelligence and support, and to work with whoever we can whenever we can, but I think that the committee is going to have a real challenge here in finding out what the real pressures are and even perhaps in anticipating what needs to be done to make sure that those pressures do not create real problems. Recommendation S says that:

“Defence Intelligence has told us that it ‘can’t cover everything all the time in the modern world’”.

Maybe we can live with everything not being covered but, as I have just said, with Mali, the Arab awakening and whatever comes next, how much coverage can we actually afford to marginalise and put to one side while we depend on others? The recommendation goes on to say:

“Nevertheless, Strategic Defence and Security Review cuts will further decrease DI’s ability to provide global coverage with sufficient depth … We urge the Government to ensure that sufficient resources are available to allow in-depth coverage to be maintained on an ongoing basis”.

I am glad that the committee has said that and I hope that it will not pull its punches with government if it feels that such problems are not being given proper priority in the future.

There is a whole section in the report about Defence Intelligence: how it fits into the wider body of intelligence and what the structures should be. I would simply say that if anything is going to be reorganised, it has to be done with very great care, and I am sure that the committee will watch that. I am slightly worried that there is a suggestion that the profile of Defence Intelligence should be higher. I am not sure that any agencies or any intelligence services having a high profile is particularly desirable.

I want to mention one other issue, which is that of staffing problems, in particular recruitment and retention. I have particularly strong views about certain aspects of this issue, which is one that the noble Baroness, Lady Hamwee, also touched on. Recommendation X in the report mentions the difficulties that GCHQ has in retaining internet specialists and actually calls it,

“a matter of grave concern”.

This is an area where we have to have and be able to keep the best individuals in the field. In a very rapidly changing and challenging situation, we have to be at least one step ahead of those who would do us harm. Recession or not, we have to pay enough to recruit and retain the individuals we need. It is not just about money. I know that there are real elements of dedicated service on the part of the individuals involved, but we have to be able to recruit and retain the best.

Another issue I find extremely worrying and which has puzzled me ever since I was made chair of the ISC in 2001 is that of recruitment from ethnic minorities. Recommendation W says:

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“All three Agencies apply the same nationality requirements, which are a prerequisite for security clearance. While that does hamper their recruitment of a more ethnically diverse workforce, we nevertheless consider that greater efforts can, and must, be made even within these constraints”.

I have not looked up the reports we published between 2001 and 2005, but I know for certain that very similar words were used in all of them. The Government’s response notes the committee’s conclusion and says that,

“the Agencies take seriously their responsibility to have an ethnically-diverse workforce”,

and that,

“the Government will continue to monitor the progress”.

Those words echo completely what was being said 10 years ago. I despair and remain puzzled as to why it is the case because there must be very many people who have the nationality requirements to join the agencies. The two seats that I represented in Parliament—Bolton West and Dewsbury—had many third-generation youngsters of families of Indian and Pakistani origin who were born here, educated here, went to university here, were well qualified and multilingual. I accept entirely that there must be careful vetting of all applicants—although in the past when there have been failures, they have often involved stereotypical agency employees rather than people from different backgrounds—but more could be done, more should be done and more should have been done years ago. I urge the committee to keep up pressure on this because not only do we have an agency workforce that is not as responsive or representative as it should be, but we are losing out on talent that we need. In the past, we have had shortages, for example, of Urdu speakers, and yet we have whole pools of them here who could be helpful.

I congratulate the committee very sincerely and urge it not to lose sight of the big picture on resources and to intensify its pressure in some of the areas that I have mentioned.

4.28 pm

Lord Hennessy of Nympsfield: My Lords, I add my thanks to the intelligence community for keeping us safe throughout our stellar Olympic summer. As a historian, I hope the Cabinet Office has commissioned an internal study of how it was done, for two reasons: first, to serve as what Whitehall used to call in the old days a fund of experience document, which can be drawn upon for the planning and protection of future great national events; and secondly, when the passage of time permits, so that the study can be declassified for future generations to appreciate a job extraordinarily well done. As far as one can see, as an outsider, the operation involved almost every element of the British intelligence community.

On that theme, I am pleased that the remit of the Intelligence and Security Committee is to be widened to embrace the community in its entirety. I note from last July’s report that the committee, rightly, places much weight on the value of horizon scanning. There have been some encouraging developments on the horizon-scanning front, in the secret world and beyond, since the document we are debating this afternoon was placed before Parliament.

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Little noticed on page 17 of the coalition’s Civil Service Reform Plan last June was a paragraph on horizon scanning which read:

“The Government needs to continue to strengthen its strategic thinking and horizon scanning, given the current environment of change and uncertainty. A review of the capability will be completed by Autumn 2012”.

Completed on time it was, and I am delighted to say that the Cabinet Office has declassified it this very day.

I should declare a minor interest. I delivered a short presentation to the review team early on in its work about the history of horizon scanning in the United Kingdom since the Committee of Imperial Defence—the National Security Council of its day—prepared its first War Books in 1912-13. The review was led by the Cabinet Office’s Joint Intelligence Organisation, so its work is well within the remit of ISC oversight.

The motive power of the review of cross-government horizon scanning as it is called, is to make better use of the considerable array of horizon scanning already undertaken across a range of departments and agencies—domestic, foreign and secret—and to embed the combined product more effectively in policy analysis and planning. Horizon scanning is, by its very nature, a perilous craft but, as the review states: “The benefits of conducting horizon scanning outweigh the negatives when it is used to add value to strategic decision making. It is a wasted resource if it is not ultimately used to inform the policy agenda in a coherent way”.

I understand that the report’s recommendations that the Cabinet Secretary should be the “champion” of trans-Whitehall horizon scanning has been implemented and that Sir Jeremy Heywood has already chaired the first meeting of his Permanent Secretary-level group which will be underpinned by a second group at director level, led by the chairman of the Joint Intelligence Committee, Jon Day.

These developments strike me as a wholly beneficial addition to our country’s ever needed capacity to look over the other side of the hill, and I hope the ISC will apply attention and support to the new arrangements.

There is one delicate sphere of horizon scanning which I think it is timely to contemplate. May I respectfully suggest to the ISC that, during the coming two years, it keep a close, scrutineer’s eye on the depth and width of contingency planning within the secret world about the possible impact of a Scottish separation on what we would no longer be able to call—should it happen—the British intelligence community?

Certain thoughts arise: would Scotland want its own security and intelligence agency with a “McC” in Edinburgh? Would an independent Scotland seek its own bespoke GCHQ? Signals intelligence is a costly and complicated business with an infrastructure all its own. Would we see aerials and antennae springing out of the thin soils of the Cheviot Hills? Would those old Cold War listening stations on the north-east coast of Scotland crackle back into aural life? In submarine terms, who would warn the Scottish Government of a Russian Akula lurking in the Minches? Would a Scottish intelligence liaison officer from the Scottish High Commission in London take his or her place every week at the Joint Intelligence Committee alongside

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the American, Canadian and Australian representatives? I have more than a suspicion that our United States intelligence allies would be far from radiant about the prospect, especially if there was a determinedly non-nuclear Government in Edinburgh.

I should not expect such contingency planning—which I sincerely hope is already under way—to be made public. However, I would hope that the ISC could examine it on behalf of Parliament and the public.

Last year’s ISC report, as has already been mentioned, examines horizon scanning very much in the context of the foreseeability—or otherwise—of the Arab spring. I had a great deal of sympathy with C’s argument, as reflected in the report, that that was the last thing Middle Eastern and north African regimes expected, so their secret worlds were not brimming with their own prescient forecasts which western intelligence might have acquired by clandestine means for warning purposes.

I thought of this old and ever present “secrets and mysteries” problem that our intelligence-gatherers always face when the files of the Franks inquiry into the origins of the Falklands War were declassified a few weeks ago. The noble Baroness, Lady Thatcher, gave absolutely riveting evidence to Franks—the transcript of which, in parts, reads just like a film script. In one section she expresses a degree of sympathy for the analysts, despite her criticisms of the intelligence community on its pre-invasion performance. Here she is in an exchange with Oliver Franks about such criticism:

“It would be the easiest thing in the world for the JIC, or whoever does the actual intelligence assessment, to say to ministers that every single thing in the world could blow up into a major incident within the next few weeks or months—Belize, Cyprus, Hong Kong … It would not be helpful, it would be incompetent, it would be weak. They have to try to alert us to some of the priorities, they have to make an assessment which does not say everything is on a knife edge”.

Another thought arose when reading the Franks inquiry transcripts. The great and the good Oliver Franks asked each of the four Prime Ministers who gave evidence—Harold Wilson, Ted Heath and Jim Callaghan, as well as the noble Baroness, Lady Thatcher—about the use they made of their intelligence feed when they were in No. 10. In their different ways they made it plain that among the piles of red boxes that the private office prepared for overnight or weekend reading, they reached first for what the noble Baroness, Lady Thatcher, called the “hot box” containing the intelligence. It was so much more interesting than yet another brief on local government rate support grant, but that is my observation, not that of the noble Baroness, Lady Thatcher.

Although perhaps it has happened already, it strikes me that it might be valuable if the ISC conducted a survey with its questions modelled on the Franks approach of how Mr David Cameron and the Ministers in the inner intelligence loop make use of the product from our country’s remarkable £2 billion a year intelligence and security machine. Again I suspect that the results could not be published, but it would be instructive and valuable, not least as an indicator, of how the new National Security Council-led tasking is playing out in real terms.

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I have a final thought that is linked to the coalition’s Civil Service Reform Plan. It contains a so-called “Action 11” which has aroused anxieties about a possible seeping politicisation of the senior ranks of the Civil Service if Secretaries of State are given the proposed “greater influence” over new appointments. I hope that the ISC will keep a careful eye on this. If there was the slightest whiff of politicising the top appointments to the secret world it would amount to an anxiety of national proportions. For almost above all others, the Queen’s most secret servants possess an overriding duty to spare their ministerial customers nothing; always and everywhere to speak truth unto power. Theirs is among the toughest of callings in Crown service; placing patterns on fragments, constantly dealing with the grimmest possibilities and the darkest sides of human nature. As the noble Lord, Lord Armstrong of Ilminster, told the Franks inquiry, the JIC is,

“presented with a series of shafts of light of varying quality and brightness on a scene and their job is to fill those in, link them and relate them to make a coherent picture”.

Those who undertake this stretching task day in and day out, and those working in the agencies who supply the particles of the intelligence picture, deserve our special gratitude and appreciation.

4.38 pm

Baroness Smith of Basildon: My Lords, this is a welcome opportunity to debate this report today. Like the report, the debate has been both fascinating and very illuminating. As the noble Marquess, Lord Lothian, said at the start of his comments, it is right that we should thank the intelligence and security services for their work. By the very nature of the work they undertake, most of us will be unaware of anything more than the occasional headline or special report, but what is so important in what they do is the detail of their investigations and their analysis. In most spheres of life, failure is not a matter of life or death, but it can be for many in our three intelligence and security service agencies—possibly their own, and certainly the potential for the death of others if they get something wrong.

The Prime Minister has made a Statement which is being repeated in your Lordships’ House on the emerging details of the hostage situation and resulting military action in Algeria. That highlights and emphasises the current international situation our security services are faced with, while the noble Lord, Lord Hennessy of Nympsfield, stressed the need to understand how and when the threat of terrorism can emerge. It serves to highlight the importance and the dangers, and the bravery of the staff who work for the agencies and why their work is so important. It also highlights why the security and oversight of that work is so important and that we must have processes that examine and take evidence on the work of the agencies, in which Parliament and the public must have confidence. The comments from my noble friend Lady Taylor of Bolton on confidence and transparency were important: it is crucial that Parliament has confidence in the work of the committee and the agencies.

We must also be assured that the agencies are using their powers appropriately and that the legislation and resources that the agencies work within are adequate

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and appropriate for the task. A crucial aspect of that work is assurance and trust that the committee has access to all the information it requires. The noble Lord, Lord King of Bridgwater, when he was chairman of the committee, in November 1998, said:

“When a situation arises that gives serious cause for public concern …We shall not be able to help matters unless we can say that we have investigated the allegations, with … access to all the relevant information”.—[Official Report, Commons, 2/11/98; col. 594.]

The committee reports directly to the Prime Minister and, in the main, its reports are published other than on issues of security. I am not aware of any disagreement between the committee and the Prime Minister on what constitutes an issue of national security. It is a huge and serious task that the committee is set and it has the respect, gratitude and confidence of the House. That comes from our faith in its honesty with the security services and agencies but also with politicians and the Prime Minister.

I turn to the details of the report and the Government’s response. We have briefly touched on the Olympics. Before the Games, when the report was published, there were huge concerns, but in all ways the Games were a great success, not least in terms of security and public protection. The report highlights the challenges that the Games presented for security, policing and counterterrorism, and it recognises the “unprecedented” pressure—I assume that the word is not used lightly—that the services were under. That was clearly made much more difficult by the appalling problems with accreditation and volunteers. We have said it before but should repeat our appreciation of the professionalism of all those involved in security for the Games, especially where emergency arrangements had to be made after the failings of G4S and those responsible for monitoring its plans and arrangements. It is worth re-emphasising our appreciation of the work of the security services, the Armed Forces and the agencies.

However, one area that gives cause for concern is the committee’s analysis of the approach to risk management. Page 25 of the report quotes the National Security Adviser, who said:

“Of course there will be greater risk. But with finite resources and a major national priority requiring greater effort over a defined period of time, it is inevitable that there will have to be a greater risk-taking in some parts of the Security Service business, and I think we have to depend on the professionalism of the Director General to decide where that risk can most safely be taken”.

In the Government’s response on this issue, they rightly state:

“The Government will never put national security at risk”.

However, in their response to the committee’s recommendation E, they state:

“The Government acknowledges that the Agencies will continue to face challenges in balancing the delivery of front-line counter-terrorism capabilities against achieving efficiencies that Government as a whole is committed to delivering”.

The rest of that paragraph is helpful in acknowledging that the agencies are facing challenges in meeting those savings targets but it also makes clear that the efficiency savings must continue.

The committee’s recommendation T puts on record, in a measured way, how concerned it is about the threat being faced and the financial situation. It welcomes

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the way that the agencies have responded to date, but expresses concern, in a specific recommendation to the Government, by saying that,

“we remain of the opinion that the Spending Review settlement must be kept under review to ensure that it is commensurate with the threat”.

That was the point made by the noble Marquess, Lord Lothian, about ensuring that the front-line capabilities are never at risk.

I am sure that the committee will continue to monitor the Government’s response, but it may be one that we have seen before, as the noble Baroness, Lady Taylor, said. I hope that we will move on from this. The response says:

“The Government welcomes the Committee’s conclusion. It was, and still is, recognised that the spending review settlement will be challenging for the SIA. The Agencies have put considerable effort in to managing their finances to live within this settlement. The settlement is still sufficient”—

thus admitting that it is not what it was—

“to enable a wide range of Agency capabilities and activities, in line with operational requirements and NSC prioritisation”.

That is an admission of how challenging it is, and the Government’s response bears out that it is right for the ISC to be concerned. I am confident, from the comments that have been made today by noble Lords who represent us on the committee, that the ISC is continuing to monitor this and is very much aware of the increased uncertainty that the services face and how they will cope with the further round of cuts in the next spending review.

We have also heard today about the Justice and Security Bill, which we debated at length in your Lordships’ House. We very much welcome the important changes that were made, even if other noble Lords would have perhaps liked to see some more openness—although not to the extent feared by the noble Baroness, Lady Taylor. The key issue for your Lordships’ House was that there should be parliamentary privilege for the ISC in terms of protection for witnesses and for the power to compel witnesses to give evidence.

There were different views on how that could best be achieved, whether by a Select Committee route with safeguards built in or by statute. At the time the Bill was being discussed, the Government gave assurances regarding privilege being conferred by statute, although the clerks have expressed their view that this could create legal uncertainty as to whether it is possible to grant privilege by statute rather than using a committee of Parliament, and the very real concern that the uncertainty could result in legal action to try to resolve the issue.

I am relaxed about the method of conferring privilege. If it is possible to confer it by statute, we would welcome that. In Committee on the Bill, the noble Lord, Lord Taylor, said that it might be possible,

“to give the committee bespoke statutory immunities that would provide the committee with protections that would replicate certain aspects of parliamentary privilege … We are considering whether this is a viable approach and whether it is the best approach to tackling this issue, and we may bring forward amendments”.—[

Official Report

, 19/11/12; col. 1651.]

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I appreciate that that was just a couple of months ago, in November last year, but the Bill is in the other place at the moment and it would be helpful if the noble Lord was able to repeat those assurances or give an update, if there is one, to your Lordships’ House.

I also found the report very interesting reading on the issue of counterterrorism and TPIMs, which the committee remains concerned about. We come back to the point on funding, which seems to be a theme throughout the report. The committee says:

“The lack of any direct correlation between risk levels and the additional funding made available to the Security Service and police to prepare for this only adds to our unease, as do the delays in putting the funding in place prior to the transition from Control Orders”.

In many walks of life when someone talks of unease, it is usually relatively benign, but I suspect that that word was carefully chosen by the committee. I am not convinced that the Government’s response fully addressed the concerns that were raised.

I have little knowledge of the interaction that the ISC has with similar bodies in other countries, or with other security services, but it is vital not only that the ISC and Parliament have confidence in adequate funding for the work of the security services but that other countries with which we co-operate also have that confidence. I do not want to overstate the point but this is something that is evident throughout the report and if the committee expresses unease, I share it. I hope that the Government genuinely welcome the recommendations in the report and will seek to find some way that links risk to funding so as not to increase the risk to a level that creates further unease.

Despite changes to enhanced TPIMs, the ISC also remains concerned because it considered that enhanced TPIMs were unworkable and said that,

“it seems unlikely that they would ever be implemented”.

The Minister will recall the recent Urgent Question regarding Ibrahim Magag, who was subject to a TPIM and absconded—apparently by hailing a black cab. Many noble Lords across the House, who had vast experience of counterterrorism issues, made the point that the removal of the control order’s power to relocate someone who was considered to be a danger made it easier for Mr Magag to abscond. The Minister was reluctant to confirm, in that short debate, that the Government’s policy change had to take some responsibility, but the fact remains that while Mr Magag was subject to a relocation order, he did not abscond. In fact, my understanding is that nobody absconded while the power to relocate was included in control orders.

Much has been said today about the Arab spring, or Arab awakening. Although the ISC recognises in its report that it can be impossible to predict how and when events such as the Arab spring will begin, it also questions whether the agencies should be better equipped to be able to better anticipate how events might unfurl. Page 15 of the report has a very helpful timeline that shows how quickly events can unfold. It can be difficult to identify or predict the trigger that unleashes events from an unstable situation, but I am not too clear—perhaps the Minister can help—whether our intelligence services were aware that the level of unrest was such

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that the potential for an escalation to the degree that we have since seen was likely. As I said, I understand the difficulty in identifying precisely how, when and why events will escalate—but was there an awareness that they could escalate in that way? If so, were the intelligence services able to advise Ministers accordingly?

I am not suggesting that it is on the same scale, but I think that the recent and current situation in Northern Ireland illustrates a similar point. I am sure that the intelligence and security agencies were, and are, aware of dissident activity. However, although they must have predicted that the flag issue in Belfast would be difficult, was there any sense that the political disengagement, anger and fear felt by some sections of society could have led to the violence we have seen? The noble Lord, Lord Alderdice, commented in your Lordships’ House when we discussed this issue that this was nothing to do with flags—it was a wider resentment, fear and anger about a range of issues.

I am not necessarily expecting answers to those points, but the issue I am trying to raise is that the views and mood that led to the Arab spring, and also to the current violence in Northern Ireland, were not new. They did not rise up suddenly but were simmering. It then just takes one incident to trigger the events that we have seen. In its report, the ISC suggests that, in the case of the Arab spring, there was a lack of understanding about the region, and it makes recommendations to the Government on addressing this. Those recommendations are crucial because there is also a downside to the uprisings and changes in Libya, that of instability in the region. The situation in Syria, and events in Mali and, particularly, Algeria, illustrate how volatile and dangerous the situation currently is. The wisdom of the committee on this specific issue is something the Government should see as an asset and an advantage.

My final point is on cybersecurity and communications data. Clearly, the way in which we communicate and how we conduct our business, including financial business, has changed dramatically in a very short period of time, and the threat to the resilience of those communications has also increased. It is clear that the ISC shares the concerns that in the UK we are at an early stage in developing our capabilities to protect UK interests. In their response to the recommendations, the Government seem to accept that. There is further evidence if the noble Lord looks at the comments made in the recent report of the Defence Select Committee in the other place, which was published on 9 January. It states:

“The evidence we received leaves us concerned that with the Armed Forces now so dependent on information and communications technology, should such systems suffer a sustained cyber attack, their ability to operate could be fatally compromised”.

Those comments and others throughout the report give enormous cause for concern. Clearly, the committee will continue to monitor this, but there are grave concerns and we need to up our game and ensure that the work that has been undertaken moves much more quickly than it has done.

I have said “finally”, but my second finally is about the draft communications Bill, which is currently in a Joint Committee of both Houses. It is crucial that the Government bring forward a Bill that recognises the

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need to bring legislation up to date with the technology being used by criminals and terrorists. Parliament as a whole recognises that at the same time there must be strong protection for public privacy, including limits and safeguards on the use, storage and access to data, not just by the police and the ISC but by private companies and other agencies. I appreciate that this is a critical issue in which there is enormous public and parliamentary interest. The changes made need to be justified by the evidence and there have to be increased safeguards and protection.

My very final comment is to thank the committee for its report and for the work of all noble Lords involved. The value of the committee is the confidence that it enjoys in Parliament as a whole—in both Houses—but also the fact that it is honest with government, Parliament and the agencies. That trust is of enormous benefit to the Government and Parliament.

4.56 pm

The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach): My Lords, I am sorry to throw the furniture around; it is not a response to what has been a really helpful debate. It has been extremely well informed, as one would expect from the speakers we have had the privilege of listening to.

Before I turn to the points raised by the noble Lord, I thank my noble friend the Lord of Lothian for opening this debate. I thank my noble friend and the noble Lord, Lord Butler of Brockwell, as the two representatives of your Lordships’ House on the Intelligence and Security Committee, for their hard work and diligence. It is evidently no sinecure, as the former chairman, the noble Baroness, Lady Taylor of Bolton, has demonstrated to us in her observations.

Having started by thanking them, I put the committee into some context. We should not forget the other members of the committee coming from the other place, in particular the chairman, my right honourable friend Sir Malcolm Rifkind. I thank them all for their contributions to the report and I recognise the support provided by the staff of the committee. I am very impressed by the expertise within the committee and the sheer dedication to its role, which is evident in the quality and volume of work that is produced. Acknowledgement should also be given to the agencies and their excellent work. Noble Lords have been unanimous in their praise, and I join in those sentiments. I would particularly like to publicly congratulate them on helping to deliver a safe and secure Olympic and Paralympic Games. The Games were a perfect example of their ability to deliver under pressure and raised still further the agencies’ reputation here in the UK and internationally.

The ISC’s annual report focused on a number of matters of great importance to the Government. I start by addressing the Justice and Security Bill, on which the noble Baroness made some of her concluding remarks. It is, of course, of particular interest to the ISC. As noble Lords will be aware, I had the privilege of leading the Bill through Report stage in this House and participated in its full and thorough analysis. I thank noble Lords for another informative discussion today because Part 1 of the Bill concerns the oversight

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of the security and intelligence agencies. That is clearly of great importance and interest to the ISC. I agree with my noble friend the Lord Lothian that the new Bill must not put the ISC in a worse position than currently with regard to the oversight of operational matters. We intend to make amendments to the Bill that may be necessary to ensure that that is not the case.

In Committee, the noble Lord, Lord Butler, and my noble friend the Marquess of Lothian made the important point that the ISC must not just be independent but it should be recognised by all as being independent. I agree wholeheartedly with that. The Justice and Security Bill will put the ISC on a stronger footing and enhance its powers, allowing for more effective oversight of intelligence and security matters. It will ensure that the ISC can no longer be open to the unfair accusation that it is just a creature of the Executive.

As I said to noble Lords on Report, it is our intention that the new ISC will be a statutory committee of Parliament, and the Government intend to table an amendment in the other place to make that clear. I hope that the noble Baroness, Lady Smith, will be reassured by that and by what I am further able to say, because we also intend to give the committee bespoke statutory immunities that will provide it with protections that replicate certain aspects of parliamentary privilege. Specifically, I can reassure my noble friend the Lord Lothian that we are considering providing protection to witnesses before the ISC so that the evidence they give in good faith could not be used against them in criminal, civil or disciplinary proceedings. A lot of work is going on at the moment to make sure that the noble Lord’s ambitions for the ISC can be fulfilled. The Government agree that the ISC will require an uplift of resourcing to enable it to undertake its strengthened oversight functions and we are discussing with the committee the precise nature of that uplift.

Part 2 of the Justice and Security Bill has generated the most interest among colleagues and the media, with some unfairly suggesting that it is a tool to cover up agency wrongdoing. It is anything but a tool for cover-ups. Closed material proceedings will in fact allow for more cases involving the intelligence services to be heard, including cases that previously could not be heard at all. Nothing that is currently heard in open court will be heard in secret in the future. The Bill is about ensuring that allegations made against the Government involving intelligence material are fully investigated and scrutinised by the courts, while addressing the potentially severe implications that could arise if sensitive intelligence secrets were disclosed in open court. In response to the suggestion—made by some outside the debate today, I hasten to add—that CMPs are open to misuse, I would emphasise that judges, not the Executive, make the final decision as to whether a closed hearing can take place, and we have put in place safeguards to make sure that that is the case.

I am strongly of the view that the provisions in the Bill are a measured and proportionate response to the challenges we face. I appreciate the work of the ISC and of noble Lords in scrutinising the Bill during its passage through the Lords, and I anticipate that scrutiny in the House of Commons will lead to further refinement of its provisions.

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The ISC report outlines major areas of the threat to our national security, including international and Northern Ireland-related terrorism, hostile foreign activity and nuclear proliferation. To ensure we continue to face these challenges appropriately, we need a clear strategic direction. As flagged in the their response, the Government support the committee’s recommendation that it is imperative that policy implications and analytical judgments remain separate in any intelligence assessment provided to Ministers.

I welcome the committee’s recognition of the agencies’ rapid response to the Arab spring. I also understand the committee’s concern that it was not foreseen. I must reiterate the points laid out in our response to the report that, in countries where you have tightly controlling regimes, it is often not possible to predict the extent to which people will take to the streets and demonstrate. It is impossible for our intelligence resources to cover the whole world at all times. The agencies rightly prioritise those countries where secret intelligence can add the greatest value. The challenge is to retain flexible capabilities that can be rapidly deployed to respond to emerging situations, such as the Arab spring—or the Arab awakening, as my noble friend Lord Lothian preferred to call it.

The noble Lord, Lord Hennessy, quoted from our recent past history to illustrate graphically that we still depend on the exercise of judgment in prioritising intelligence gathered and indeed intelligence gathering.

With reference to the Olympics, I am extremely pleased to be able to say that the Games were a triumph for safety and security. Many noble Lords, including the noble Lord, Lord Butler, have referred to this. A considerable amount of work went into ensuring that the Games were secure, and the Security Service had to cope with an increased level of risk across its portfolio of work. It is a testament to the service that it managed this risk effectively and was able to maintain the appropriate levels of resourcing to cover areas of additional potential concern that were not terrorism-related. As the noble Lord, Lord Butler, said, it avoided the risks to the nation as well as to the Games.

A number of noble Lords have rightly talked about cybersecurity as another key theme within the annual report. The Government response explained our approach to improving cybersecurity in the United Kingdom and we will be extending this work going forward. This will include the rollout of a programme of public awareness initiatives, delivered in partnership with the private sector and aimed at increasing cyber confidence and improving online safety for both consumers and businesses. At every level, cybersecurity is an issue and I note noble Lords’ comments that, while they welcome the Government’s funding commitment, there is a need for a sustainable funding stream for this activity into the future.

We are also supporting the development of cybersecurity skills and education across the UK in schools, higher education and beyond, including the “Behind the Screen” initiative to provide cybersecurity education at GCSE level. The future lies in us all being well educated about risks that the failure to provide cybersecurity can bring. I agree with the committee

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that cybersecurity is a key issue for UK national security and I can reassure noble Lords that the Government take this extremely seriously.

The ISC annual report, quite rightly, refers to counterproliferation as a key issue and references, in particular, concerns regarding Iran and its continuing efforts to enrich uranium in violation of six UN Security Council resolutions. In response, we are committed to a dual-track approach of engagement and peaceful pressure. The past year saw a significant increase of pressure, including an EU oil embargo and enhanced financial sanctions. Iran and the E3+3 grouping, which consists of the UK, France, Germany, the US, China and Russia, met four times to discuss Iran’s nuclear programme and, in December 2012, a further round of talks was offered to Iran. I think that this is the right approach.

The noble Baroness mentioned TPIMs. The ISC report noted its concerns about the new terrorism and prevention investigation measures regime, and there have been suggestions that the abscond of Ibrahim Magag has shown that its concerns were well placed. National security is the Government’s top priority, and the police, security services and other agencies are doing everything in their power to apprehend this man as quickly as possible. I would emphasise that this is not a reflection on the effectiveness of the TPIM regime and that this abscond had nothing to do with the change from control orders to TPIMs. The TPIM Act provides rigorous measures to manage the threat posed by terror suspects who we cannot yet prosecute or deport by limiting their ability to communicate, associate and travel. This is the first abscond by someone subject to a TPIM, and it should be noted that, in the six years of control orders, there were seven absconds. David Anderson, the independent reviewer of terrorism legislation, said that:

“The only sure way to prevent absconding is to lock people in a high security prison”.

I agree, and said so in the debate we had on the Urgent Question. Where an individual cannot be prosecuted or deported, whatever steps are taken and wherever they are located in the country, there will always be a risk of their absconding, just as there were under control orders. It has been suggested that a review of the TPIM system should be undertaken. I am satisfied that the TPIM regime is a robust and effective system for dealing with terror suspects who we cannot yet prosecute or deport, but we will review our procedures following this incident. I remind noble Lords that, as part of his role as the independent reviewer of terrorism legislation, David Anderson also conducts an annual report that covers TPIMs. I would expect him to examine this as part of his review.

We have spoken today, and there have been quite a lot of discussions, about budgets and resources and the pressures faced by the agencies. My noble friend Lord Lothian mentioned this in his introduction and many noble Lords have referred to it. It has been the policy of successive Governments not to reveal details of the individual agency budgets, and I do not intend to diverge from this particular practice. However, I am able to say that the Government welcome the ISC’s recognition of the vital role that, for example, Defence Intelligence plays within the Whitehall intelligence

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community. The reduction of the deficit is the Government’s top priority—all noble Lords will understand that—which means bearing down on public expenditure. The MoD, in common with the three agencies, will have to make economies to meet the demands placed on it by government, and no area of the MoD’s business can be exempt from those economies. However, I am confident that DI will continue to prioritise in those areas that matter most to UK national interests and defence. DI retains the ability to surge people into these areas, should the need arise, and work collaboratively with allies in areas of mutual interest where it is a national priority to do so.

The total security and intelligence agencies budget is approximately £2 billion per annum. It was and still is recognised that the spending review settlement will be challenging for the agencies. They will need to maximise value for money, efficiencies and collaborative working in order to live within this settlement. Agency heads are aware of the need to deliver efficiency savings while continuing to maintain capability; and there has been steady progress towards this over the past year.

The ISC has full access to the budgets of the agencies and I trust that it will continue to draw attention to any funding issues it feels warrant particular consideration. For example, the noble Baroness, Lady Taylor, and my noble friend Lady Hamwee talked about the recruitment and retention of personnel. That must be a matter to which the Government and the ISC should pay proper attention. I note the committee’s concerns about the achievement of sustainable efficiencies, particularly from collaborative working. The National Security Adviser will continue to monitor the agencies’ ability to meet these matters.

My noble friend Lady Hamwee raised concerns over the agencies’ ability to maintain effective staffing levels. In response to changes in the nature of the threat and the economic climate, the agencies have reviewed their staffing and skills requirements to ensure that they are in the best shape to meet future national security challenges. Each agency undertook a programme of redundancies or early release. These programmes, alongside recruitment in key areas, have enabled the agencies to grow the skills and expertise that they need to meet their future objectives and provide greater room for capacity growth within the organisations. The Government recognise that recruitment and retention of internet specialists at GCHQ is a matter of the greatest importance. We have therefore been working closely and urgently with GCHQ to identify a sustainable package of measures to improve its capacity to attract and retain staff with the necessary internet skills and to implement these measures by the end of the year. We will of course continue to monitor the situation and review these new measures.

I should make a point about diversity. Vetting is essential to the agencies to ensure the security of their work. Nationality requirements can pose real challenges in the case of some minority applicants and I hope that noble Lords will understand that. However, we are working with the agencies to improve diversity. A number of recruitment campaigns online and in the printed media have been specifically designed to attract those from diverse backgrounds.

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My noble friend Lady Hamwee also raised the issue of attendance at JIC and NSC. These two bodies have regular attendees. However, with neither body does this prevent others attending when a subject under discussion is relevant.

I am sorry if I have spoken at some length but this has been a substantial debate on an important matter of public interest. I am grateful to all noble Lords who have taken part in a debate on a wide-ranging report. I warmly welcome the annual report and look forward to future annual reports being equally or—given the new arrangements in train for the ISC—perhaps even more insightful. Finally, I conclude by paying tribute once again to the enormous contribution made by the security and intelligence agencies in ensuring that the British public are properly protected. The men and women who work in our agencies are hugely skilled, professional and dedicated. The burdens that secrecy imposes on their private lives can be great and we owe them a great debt of gratitude.

5.20 pm

The Marquess of Lothian: My Lords, I can and will be brief. I just want to make a number of comments in relation to what I thought was a very sensible and insightful debate. The remarks made today have reflected the essentially non-partisan nature of the ISC, which is one of its great strengths. I start by thanking the Minister for his remarks. I will not go into them in detail. He has given a number of indications of amendments in another place and assurances as to adequate funding, and we look forward to seeing those amendments and hearing the outcome of those discussions on funding. It has been helpful to have those remarks.

With regard to what has happened recently in Algeria and the lessons that can be learned—we have missed the Statement so I do not know what was said—it strikes me that something we should be looking to for the future is a proper analysis of what happens to arms when they disappear. We know that in Libya Gaddafi’s arms disappeared, and we have indications that some may have reappeared in Algeria this week. I have a great concern at the moment that some of the arms that have been provided to the rebels in Syria, vicariously or directly, may end up in the hands of al-Nusra and other Islamist organisations, which would not be in the interests of this Government in the future. I hope that area will be looked at.

I mentioned retention last year and made a very strong point about it. One of the reasons for talking about the retention of staff within the agencies generally,

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but specifically within GCHQ, is that the nature of GCHQ’s work means that the people who operate there are highly skilled in IT. They are recruited because they are what the director-general described in our report last year as “whizzes”. He said, “How do I hold on to my whizzes when the outside world is trying to recruit them at far greater expense than I could ever meet in order to keep them?”. It is an unresolved problem that I hope the Government will go on wrestling with. I am glad it was raised by a number of noble Lords here today.

The noble Baroness, Lady Hamwee, raised the issue of redactions. This is something that comes up every year. Redactions irritate us all. When I was the shadow Foreign Secretary in another place, I used to enjoy the debates because I would read out pages of redactions and it always got a laugh. It was only when I joined the committee that I realised how essential they are. The committee does not write its own redactions. The committee writes its report as it sees things and that report is to be seen by the Prime Minister. It is the Prime Minister who will come back and say, “We feel there are certain areas here that should not be in the report that is published”. In my experience—and I may be wrong—I do not think there has ever been a redaction, which can only be allowed on grounds of national security, that has not eventually been agreed between the committee and the Prime Minister, because if it is a matter of national security there is no question in the committee’s mind that that should not be redacted. We could write reports without redactions, but they would not be as valuable to the Prime Minister or, indeed, the general public.

My final point is in relation to the speech of the noble Lord, Lord Hennessy. Once again, we have heard an interesting and thought-provoking speech. I cannot undertake that the committee will look at everything he has raised but I can undertake to personally ensure that his remarks are brought to the attention of the committee and that copies of his speech are made available to the members of the committee so that they can consider some of the very relevant remarks he made.

We have had an important debate. I am grateful to the noble Lord, Lord Butler, whose speech I totally endorse. I think he and I feel that we are part of a committee that works very closely and proactively together. I am grateful, too, as I said earlier, to those who serve us on that committee. I thank this Committee for this debate.

Motion agreed.

Committee adjourned at 5.24 pm.