Bloody Sunday agent was paid £25,000 a year

A senior MI5 officer admitted yesterday that an informer who claimed the Sinn Fein leader Martin McGuinness fired the first shot on Bloody Sunday had sometimes lied and invented intelligence but was paid up to £25,000 a year.

The officer, who currently heads the MI5 section dealing with Irish terrorism, maintained that the informer was "for the most part, a very reliable agent".

The MI5 officer was giving evidence anonymously at the inquiry into the events of Bloody Sunday, when 14 people were shot dead by paratroops in Londonderry in 1972.

His evidence concerned an agent codenamed Infliction. The officer filed a 1984 report saying: "Martin McGuinness had admitted to Infliction that he had personally fired the shot ... that had precipitated the Bloody Sunday episode."

Mr McGuinness, Sinn Fein's chief negotiator, has admitted being second-in-command of the IRA in the city at the time of Bloody Sunday but has denied firing any shots on that day. The informer himself will not be called to give evidence because of fears for his life.

Mr McGuinness has protested against the form of the hearings, declaring: "I am being denied the right to challenge unfounded and unsubstantiated allegations made about me by an anonymous individual."

In his evidence yesterday the MI5 officer said there were differing views within the intelligence community on the reliability of Infliction, who was paid between £15,000 and £25,000 a year. Those sums were at the top end of the scale paid to agents because they reflected the "access he had to information about the IRA, the potential of the case and the risks that he ran in obtaining it".

He said he was now sure that the discussion between Mr McGuinness and Infliction took place fairly soon after Bloody Sunday and said he believed it was truthful.

"I cannot think of any credible reason why Infliction should have lied about this particular issue," he said. "He was not asking for, nor did he ask for, any additional payment for this piece of information. He did not dislike or resent Mr McGuinness as far as I know, and certainly never said that he did ... We had some information which corroborated the fact that they knew each other and had known each other for some time and appeared to get on well."

* Two serving Northern Ireland police officers are among those whose details have been sent to the director of public prosecutions by Sir John Stevens, the Metropolitan Police Commissioner, after his inquiry into collusion between intelligence elements and loyalist paramilitary groups, centring on the murder in 1989 of the Belfast solicitor Pat Finucane.

Sir John's inquiry found evidence of collusion in the withholding of intelligence and evidence and that at least two loyalist killings could have been prevented.