The Cabinet has also called in a team from GCHQ, the Government's listening post, to help to protect computers containing sensitive information from sabotage and snooping.
The new drive against "information warfare" is designed to guard vital files from terrorists - who are increasingly turning to computer sabotage to cause havoc - spies from foreign governments and teenage computer hackers who consider accessing secret documents a game.
The Home Secretary, Jack Straw, has taken on responsibility for protecting Britain's computers, including those in banking and airlines.
His advisers have warned that as Britain becomes more reliant on computers, vital Government systems, including those in the health service, air traffic control and defence, are becoming more and more vulnerable to malicious attack.
"An attack could come from individuals such as hackers, criminals or terrorist groups who might benefit from seeing our business disrupted," said a Home Office spokesman.
The GCHQ experts will build more complicated encryption devices and systems to check the identity of users, as well as blocking weak spots.
The Government has denied that its security systems have been successfully breached. But The Independent on Sunday has learned from computer hackers and experts working within Government that hackers have gained access to Government-run files, including those held by the National Health Service. But they find it difficult to move around within the system because of secure "firewalls".
Hackers working from outside gain access through modems used by Government employees who are filing information in from outside. The hackers dial thousands of random passwords and telephone numbers using special programmes. Others set up fake screens to "catch" the passwords of people who think they are logging on to genuine systems.
A hackers' internet chat site includes telephone numbers of Government systems which they have successfully hacked. Most of the hackers like to boast about how far they have got, but rarely do damage. The most tightly protected systems - such as M16 - are considered the greatest prizes.
One of the aims of the new drive is to block all these access points. Staff from GCHQ, who have accessed the hackers' networks, quickly close points which have been penetrated. Hackers have not cracked the Government's internal "intranet" used by ministers and civil servants to talk to one another electronically.
"You can randomly dial in," said one hacker who asked not to be named. "There are programmes to kick out random passwords and combinations. They have been beefing up the security and the higher you get the tougher it is to get in.
"Most people hack just to say they can do it. But people who really hate the Government are much more dangerous. There are some fruitcakes out there. They won't just look and leave a nickname. They will delete files and change passwords."
At GCHQ and Racal Electronics - the defence company which builds and manages secure computer systems for 32 Government departments - teams are on 24-hour alert against computer hackers. An alarm goes off at Racal's headquarters every time there is a security breach and security staff track the infiltrator.
The new Cabinet committee will devise plans to protect not only Government and secret service files from hacking but to help firms defend against industrial sabotage. Some businesses, including merchant banks, have hired teenage hackers to try to get in, then filled gaps the hackers identified.
Government staff working on sensitive material will be warned not to use the internet from their terminals because this could provide a window for infiltrators to break in. They will also be told to change common passwords.
"The terminal connecting to a wider internet shouldn't be connected to another network," said Richard Allan, chairman of the House of Commons Information Technology Select Committee. "Computer systems are becoming more and more important in all our lives and we have to be confident that they are secure. This is particularly true of Government systems like the NHS which can hold sensitive personal data."
In the US, the Pentagon, the CIA, Nasa and the Department of Justice have been penetrated. In 1997 an unknown hacker broke into the Canadian Security Intelligence Service's computer system.Reuse content