The Big Question: Could MI5 have done more to prevent July 7, and do we need an inquiry?

Why are we asking this question now?

The conclusion of Britain's longest terror trial should have been a moment of jubilation and relief for the security services. Five Islamist extremists are this week beginning life sentences in prison after police and MI5 smashed a conspiracy in 2004 to use massive fertiliser bombs to unleash carnage on a scale approaching the September 11 attacks in the United States.

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But any sense of triumph has been overshadowed by the discovery that, during their investigation, counter-terrorist officers encountered the July 7 bombers Mohammad Sidique Khan and Shehzad Tanweer several times.

The pair were dismissed as peripheral to the inquiry and appear to have vanished off the intelligence agencies' radar. They re-emerged to deadly effect when Khan and his right-hand man Tanweer co-ordinated the suicide attacks on the London transport network in which 52 people died and more than 800 were injured. The extent of the links between the "fertiliser bomb" plot leaders and the July 7 suicide attackers and of the missed opportunities to keep track of Khan and Tanweer has provoked fury among survivors of the attacks and its victims' bereaved relatives. Yesterday they handed a letter to John Reid, the Home Secretary, demanding a full independent inquiry into the apparent intelligence failings. The Government is resisting the pressure, but it could become overwhelming.

How much did the security services know about Khan and Tanweer?

Shortly after July 7, the security services briefed journalists that the culprits were "clean skins" - men with no previous record of terrorist connections. In fact, the security services repeatedly came across, but did not identify, Khan and Tanweer as they trailed Omar Khyam, the mastermind of the "fertiliser bomb" plot. The pair were recorded meeting gang members at least four times and a photograph was taken of Khan, Tanweer and Khyam chatting at a service station after arriving in separate cars.

MI5 surveillance logs uncovered by BBC1's Panorama show that a team of agents tracked Khan driving from London to his family home in Dewsbury, West Yorkshire. They also recorded the registration number of his Honda, which was in the name of Khan's wife.

It has also emerged that Khan and Khyam attended a terror training camp together in Pakistan. During one taped conversation, Khan revealed that he was working for a terrorist group and in another he disclosed that he intended to fight with militia groups on Pakistan's border with Afghanistan.

In early 2005 MI5 circulated a photograph of Khan to intelligence agencies around the world. But the FBI did not show it to Mohammed Babar, the one witness who could have positively identified him. Babar, the American "supergrass" in the fertiliser trial, had been to the same training camp as Khan and Khyam.

Why were the leads not followed up?

MI5 tracked Khan and Tanweer to their front doors in West Yorkshire but gave up surveillance at that point, concluding that they were mainly involved in credit card fraud.

Both were placed in a group of 40 "low-priority" suspects, which MI5 did not have the agents to investigate futher. It was concentrating instead on 55 extremists suspected of direct links with al-Qa'ida, whose moves were monitored by up to 60 counter-terrorist officers. Crucially MI5 never asked West Yorkshire Police special branch to investigate Khan, Tanweer or their contacts and it failed to pass on Khan's photograph or his car number plate details.

In an unprecedented statement issued after the Old Bailey verdicts were handed down, the agency said Khan and Tanweer "appeared as petty fraudsters in loose contact with members of the plot". It insisted there was "no indication that they were involved in planning any kind of terrorist attack in the UK" and said: "The links between the fertiliser plot bombers and Khan and Tanweer represent less than 0.1 per cent of all the links on record in relation to the fertiliser plot investigation."

What has been the reaction to the disclosure of the missed links?

In its report into the July 7 bombings, the parliamentary Intelligence and Security Committee (ISC) considered whether Khan and Tanweer should have been picked up by police before they and two accomplices brought havoc to London. The ISC concluded that MI5's decision to concentrate on other targets was justified at the time, although it has been reported that the committee was not told the full extent of the surveillance of the pair.

The dramatic conclusion to the Old Bailey trial has reignited demands for an independent inquiry into intelligence failings ahead of the atrocities.

Ministers have steadfastly refused demands to set up an independent inquiry, arguing it would be expensive and divert MI5 and police attention at a time when they should be solely focusing on combating current terror threats.

Mr Reid has offered a minor concession, announcing that the ISC would re-examine "whether there are questions here that still need [to be] answered".

But it is not enough to satisfy the critics, who protest that the committee lacks any independent investigative capacity and, as it includes serving politicians, would not be apolitical.

What lessons have been learned?

Mr Reid warned last year that the response to terrorism needed to be overhauled to produce "a seamless co-ordinated approach to the now seamless threat". It is likely that the communication breakdown between MI5 and Special Branch was in his mind as he announced the overhaul that will see the fight against terrorism directed from a slimmed-down Home Office.

In the three years since Khan and Tanweer slipped through the net, MI5's strength has been boosted from 2,000 to 3,500 and recruitment of agents with Muslim backgrounds is underway.

Nine regional MI5 offices have been opened, reflecting the fear that home-grown terrorists could be lying low across the country.

Could such mistakes happen again?

The chilling reality is that it is highly likely as the terror threat is growing as fast as the security services are given new resources. Five months ago, Dame Eliza Manningham-Buller, the former head of MI5, said her agents were tracking 30 plots involving 1,600 fanatics and forecast that the menace facing Britain could remain for a generation. Warning that the security service will not be able to investigate all the activities it considered suspicious, she said: "I wish life were like Spooks [the TV series] where everything is, a, knowable, and, b, solvable by six people." About a dozen plots have been thwarted since 2005, but al-Qa'ida's followers only need to get lucky once to cause mayhem and bloodshed on British soil again.

Do we need a public inquiry?

Yes...

* The bombings were so devastating that it is unthinkable that an investigation into any intelligence failings take place in private

* An independent inquiry is essential to reassure the public that MI5 failings are being addressed

* The mistakes need to be considered by a judge with no political axe to grind

No...

* MI5, with its limited resources, had little direct evidence of Khan or Tanweer's direct involvement in violent terrorism.

* A public inquiry would be expensive, lengthy and a field day for the lawyers

* It would divert the intelligence services and police from the continuing, and growing, threat from terrorism