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The secret service agencies, MI5 and MI6, agreed to pay about £12 million ($18.4 million) from their own budgets to former British detainees in Guantanamo Bay.

The payments were disclosed as the national security adviser, Sir Peter Ricketts, warned that spending cuts could damage morale in the intelligence services and threaten security.

Details of the payments are contained in the accounts for the security and intelligence agencies, which were published this week.

They show that the agencies spent £13.7 million on ''losses and special payments'' in the 12 months to the end of March this year. It is thought that around £12 million is likely to have been paid to the Guantanamo Bay suspects.

This is because the agencies have, on average, spent £1.5 million a year on losses and special payments over the past five years. The total compensation figure paid to 16 Britons, who were suing the government, is likely to be about £14 million, and will have been swelled by payments from other departments.

The former detainees have denied wrongdoing. The men had claimed that the government had allowed them to be sent to be mistreated at the US detention centre in Guantanamo Bay.

Spy Agencies Paid Detainees Millions

meanwhile .....

A top-secret document revealing how MI6 and MI5 officers were allowed to extract information from prisoners being illegally tortured overseas has been seen by the Guardian.

The interrogation policy - details of which are believed to be too sensitive to be publicly released at the government inquiry into the UK's role in torture and rendition - instructed senior intelligence officers to weigh the importance of the information being sought against the amount of pain they expected a prisoner to suffer. It was operated by the British government for almost a decade.

A copy of the secret policy showed senior intelligence officers and ministers feared the British public could be at greater risk of a terrorist attack if Islamists became aware of its existence.

One section states: "If the possibility exists that information will be or has been obtained through the mistreatment of detainees, the negative consequences may include any potential adverse effects on national security if the fact of the agency seeking or accepting information in those circumstances were to be publicly revealed.

"For instance, it is possible that in some circumstances such a revelation could result in further radicalisation, leading to an increase in the threat from terrorism."

The policy adds that such a disclosure "could result in damage to the reputation of the agencies", and that this could undermine their effectiveness.

The fact that the interrogation policy document and other similar papers may not be made public during the inquiry into British complicity in torture and rendition has led to human rights groups and lawyers refusing to give evidence or attend any meetings with the inquiry team because it does not have "credibility or transparency".

The decision by 10 groups - including Liberty, Reprieve and Amnesty International - follows the publication of the inquiry's protocols, which show the final decision on whether material uncovered by the inquiry, led by Sir Peter Gibson, can be made public will rest with the cabinet secretary.

The inquiry will begin after a police investigation into torture allegations has been completed.

UK's Secret Policy on Torture Revealed

Baroness Manningham-Buller disclosed that she had warned the then Labour Prime Minister that the UK would be at greater risk of terrorist attacks if he pursued military action against Saddam Hussein's regime.

The former director general of the domestic security service, who retired in 2007, described the Iraq conflict as a "distraction" from efforts to tackle al Qaida and warned that more terrorist attacks on British soil seemed likely.

Her comments, in an interview to mark the start of her three Reith Lectures, which will be broadcast on BBC Radio 4 this week, represent the most outspoken criticisms to date of the 2003 conflict by such a senior figure in the intelligence services.

Mr Blair, and his former communications director, Alastair Campbell, have faced repeated criticism over the Labour government's public case for military action.

Downing Street infamously claimed that Iraq could deploy weapons of mass destruction (WMD) within 45 minutes of an order to do so, although no evidence of such a WMD programme was ever found.

In an interview with the Radio Times, Lady Manningham-Buller suggested that she argued at the time that the Government should focus on defeating al Qaida and winning the war in Afghanistan instead of attacking Saddam Hussein.

"Iraq did not present a threat to the UK," she said. "The service advised that it was likely to increase the domestic threat and that it was a distraction from the pursuit of al Qaida. I understood the need to focus on Afghanistan. Iraq was a distraction."

She said it was "for others to decide" whether the Iraq war had a mistake but added: "Intelligence isn't complete without the full picture and the full picture is all about doubt. Otherwise, you go the way of George Bush."

Last year, Lady Manningham-Buller warned that the invasion of Iraq had led to the radicalisation of some young British Muslims.

MI5 Told Blair Iraq Was No Threat To UK