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The Agencies' Priorities, Plans and Finances
10. The annual presentations to the Committee by each of the Agency Heads on performance, current priorities, future plans and finances took place in the early Spring of this year2 . To ensure that we are kept fully informed on the full range of the Agencies' activities, we have since agreed on an additional programme of more frequent briefings for the Committee on the Agencies' priorities, successes and problems.
11. The Committee's last two Annual Reports3 described the shifts in the Agencies' effort that followed the ending of the Cold War, reflecting new intelligence requirements on a wide range of threats to, and opportunities for, British interests. This year, the annual presentations took place against a backdrop of the review of the Single Intelligence Vote (SIVR), as part of the Government's Comprehensive Spending Review. That Review examined current levels of expenditure devoted to the Agencies, and addressed a number of other questions including whether the work of the Agencies was focused on the right priorities in the national interest, or whether there should be any change in focus. The intelligence requirements process, therefore, was effectively frozen whilst the review was carried out, as - in many areas - were the Agencies' own allocations of operational resources, for planning purposes at least. We identified, however, a number of significant changes in the allocation of operational resources since the last Report by the Committee was submitted in December 19964.
SIS and GCHQ
12. ***
***
***5,6,7
13. Another important change over the past year has been the raising of the priority of work against drugs trafficking to the First Order of Importance, and the effect this has had on the Agencies' work in this area. SIS devotes *** of operational effort to this task, a figure, on the face of it, unchanged over the past few years. The Chief of SIS told us, however, that what had changed was that the Agency was now concentrating its efforts as far as possible on "going up the supply chain", and has sought and got other departmental sponsorship and funding for "major projects, strategically done, against suppliers"8. Director GCHQ also told us of a recent growth in this area of work, reflected in a significant rise in the number of requests by the law enforcement agencies to take action on sigint reports on these subjects9. The drug threat is a major menace to this country. We strongly support the increased priority being given to this work by our intelligence services, and we shall continue to take a close interest in this area.
14. We also questioned the Agencies closely on *** work on Iraq, and the extent of intelligence sharing with *** principal allies on this issue10. *** We accept these assurances, and the evidence we were given *** ***
15. The percentages of GCHQ sigint resources for the priorities above are:
***
***11
The Security Service
16. For the Security Service, the renewed ceasefires in Northern Ireland led directly to a drop of over 5% in the Service allocation of resources to Irish and domestic counter-terrorism work, from 24.8% to an anticipated 19.5% during the course of the year12. We took detailed evidence from the Director-General of the Service specifically on work in this area, including the Service's key role in operations AIRLINES and TINNlTUS which resulted in the convictions of some of the most important terrorists in the Provisional IRA. In the first case, 40 Security Service staff gave witness statements, in the second, around 200 - though, in the event, none were called to give evidence13. This is a graphic illustration of the scale of the resources involved in combating the terrorist threat. Despite the cease fire and the Good Friday agreement, there are clearly still elements in Northern Ireland who are intent on using terrorism to further their political aims. We strongly support the vital work done by the security forces in countering this threat, and accept that considerable resources will continue to need to be devoted to this work.
17. There were also some increases in resources devoted to work against the other threats from international terrorism, at 16.4% and proliferation, espionage and serious organised crime, which together comprise 19.1%14. In the latter respect, we have not had an opportunity during the year to take a detailed look into the arrangements for the operational co-ordination of the Security Service and the law enforcement agencies in this area. The Director-General did, however, tell us that the Service had taken on 24 taskings - from NCIS, the Regional Crime Squads, the Metropolitan Police, provincial forces and HM Customs and Excise - since October 1996, when the new arrangements came into effect. Six of these taskings had been successfully completed, and the Service had issued around 1,000 reports in respect of the investigations in which it was involved15. We intend to return to this subject in the autumn, to take further evidence in particular on what value is added by the Service's involvement in this new area.
Expenditure
18. As part of the annual presentations, we continued the Committee's previous practice of examining in detail the Agencies' individual budgets and expenditure. In this, we were again aided by valuable advice from senior staff from the National Audit Office. This year we sought more information from the Agencies, and also sought to improve the form in which it was presented. The new forms, attached at Appendix 3 to this Report, have greatly helped the Committee in its understanding of the Agencies' finances. We were told that they have also been of value to the NAO16. Ministers may also wish to have financial information presented in this way, in their own considerations of the Agencies' budgets.
19. The Single Intelligence Vote (SIV) outturn totals for 1994/95-1996/97, the expected outturn for 1997/98, and the budgets for 1998/99-2001/2002, are shown in the table below17. Figures for the individual Agency budgets are not at present published. The Committee believes that the fullest information should be published wherever possible, and will be discussing further whether there could be greater openness in this area.
All figures £m (Cash)
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| SIS | GCHQ | Security
Service | SIV TOTAL |
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| 1994/95 | *** | *** | *** | 855.1 |
| 1995/96 | *** | *** | *** | 780.8 |
| 1996/97 | *** | *** | *** | 740.7 |
| 1997/98 | *** | *** | *** | 707.8 |
| 1998/99 | *** | *** | *** | 693.7 |
| 1999/2000 | *** | *** | *** | 743.2 |
| 2000/2001 | *** | *** | *** | 745.0 |
| 2001/2002 | *** | *** | *** | 746.9 |
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1. These figures exclude the costs of the SIS and Security Service pension schemes.
2. 'Exceptional' costs associated with the moves of SIS and the Security Service into Vauxhall Cross and Thames House respectively are included in the earlier years.
3. Figures for 1998/99 onwards show a net reduction of around £15m, reflecting accounting adjustments with the
introduction of capital charging for property.
20. We were fully briefed on the Agencies' future plans in the course of the annual presentations. However, since then there has been the Review of the SIV, the outcome of which is shown above in the figures for the years 1999/2000-2001/2002, which were provided to us just prior to submission of this Report. On our return in the autumn, we shall be examining the detail of the settlement and the full range of issues covered in the Review, taking evidence from the Agency Heads and others who were directly involved in the process. At the start of this year, early in the review process, we sought a meeting with those responsible for the Review to discuss its remit, and to highlight certain areas that we believed merited particular consideration, including: structural questions on the organisation of the UK intelligence community, and the importance of giving wider consideration to the work of the Defence Intelligence Staff (DIS) in the MOD. In this latter regard, we shall also be concerned to examine any changes proposed in the funding and structure of the DIS as a result of the Government's Strategic Defence Review, and the implications that these may also have for work of the Agencies.
The work of the National Audit Office
21. In our work on the Agencies' budgets, we are concerned to ensure that each has access to adequate resources for the tasks they are asked to undertake, and that those resources are being used in a cost-effective way. The external auditing function, however, falls to the NAO which, because of the particular sensitivities in this area, reports directly to the Chairman of the Public Accounts Committee in the House of Commons. This is an important arm of the intelligence oversight structure outside the executive, and we have given some consideration to the practical nature of that department's role in this respect, and the extent of its access to the Agencies' information. We were told, for example, that no value for money project work in respect of the Agencies had been carried out over the past few years18; our own view is that it would be desirable where practicable to carry out further studies into all aspects of the Agencies' activities, and we will be pursuing this issue with the auditors.
22. We have examined in some detail the Ministerially-approved arrangements for the disclosure of information by each of the Agencies to the Comptroller and Auditor-General (C&AG)19. These include certain restrictions to protect the identities of agents and the details of particularly sensitive operations, where the withholding of information would in each case require the approval of the relevant Secretary of State. We were told, however, that the NAO could foresee no requirement for access to information on individual agent identities, and that it had never been refused access to any other sensitive operational information on request. We questioned the NAO in particular on the implications of the recent fraud case in the Metropolitan Police, when the single person responsible for the secret funds for paying agents had fraudulently appropriated very substantial sums of money. They had identified the problem, and believed that adequate checks could be operated to prevent such fraud without direct approaches to individual agents20.
23. On the evidence we have taken, it is clear that the auditors believe that they have access to all the necessary information they require from each of the Agencies to enable them to carry out their functions effectively. We nevertheless believe that the procedures for the disclosure of information should be further strengthened in the following respects:
- there should be a specific obligation on the Agencies to inform the NAO of material items of expenditure;
- the arrangements for the disclosure of information by SIS, approved by the Foreign and Commonwealth Secretary, should be brought as far as possible into line with those for the Security Service, specifically in providing for the C&AG to be given the reasons for any refusal to provide him with information;
- in view of our own statutory responsibility to examine the Agencies' expenditure, formal provision should also be made for the disclosure of information and reports by the C&AG to this Committee, in consultation with the Chairman of the House of Commons Public Accounts Committee.
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Prepared November 1998 |
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