Jack Straw is to meet the director of the security service, Stephen Lander, after a former MI5 officer claimed in a newspaper article that the organisation had tapped the Minister Without Portfolio's telephone for three years. David Shayler also said that Mr Straw himself had been regarded as a "Communist sympathiser" purely because he was president of the National Union of Students.
Other allegations made by Mr Shayler in the Mail on Sunday included claims that the service had kept a file on Harriet Harman, the Secretary of State for Social Security. He also said it planned to burgle the home of a Guardian journalist who was channelling Libyan funds to pay for a libel action against The Independent.
Last night a Home Office spokeswoman said the meeting between Mr Straw and Mr Lander was expected to take place "soon." She added: "The Home Secretary will be receiving a report from the director-general, Stephen Lander, over the issues raised at the weekend as soon as possible. Consideration is being given to what if any action should be taken."
The Home Office declined to go into details about the issues which would be covered in Mr Lander's report, or spell out what action it might be considering.
It is likely, however, that MI5 will at least be considering whether to ask the police to investigate whether Mr Shayler has committed an offence under the Official Secrets Act. Ultimately, it would be for the Attorney General, John Morris,to sanction any prosecution, should one be deemed appropriate.
Mr Straw is also likely to want to hear the security service's justification for carrying out surveillance on the targets identified by Mr Shayler.
Yesterday Mr Mandelson dismissed as "a pure smear" suggestions that MI5 took an interest in him because he had been a member of the Communist Party in the 1970s.
He said in a newspaper interview that he had for a brief spell attended meetings of the Young Communist League when he was an 18-year-old sixth- former in the early 1970s, but added: "I was never a member of the Communist Party. That is a pure smear."
The Guardian is asking Mr Lander for an explanation of Mr Shayler's allegation that MI5 tapped the home telephone of Victoria Brittain, the paper's deputy foreign editor, after large sums of money were deposited in her bank account. The transactions were innocent, the paper said.
Mr Shayler also recounted that MI5 kept files on John Lennon and "subversive" bands like the Sex Pistols and UB40.
The 31-year-old former officer has spoken to The Independent from an undisclosed location in Europe, and has said that he plans to stay on the run. He he believed he could not be extradited, but added: "I have to accept that I would be a fugitive. But no other country has a law like the Official Secrets Act so I don't think any court would allow me to be sent back to Britain."
His claims that the service carried out large numbers of arguably unnecessary bugging operations are bound to have infuriated his former colleagues. He also spoke of a culture of heavy drinking bureaucracy and low morale within MI5. It has also emerged that Mr Shayler had risked the wrath of the security service before he even joined it, when as the editor of a student newspaper he published banned extracts from Spycatcher, the banned memoirs of another former officer, Peter Wright.