The Royal Bugging Row: Cabinet to consider new powers over MI6: Bill on the intelligence service could form part of the Queen's Speech in November

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THE CABINET will today discuss legislation to put MI6 on a statutory basis, but ministers were said to be 'going cold' on creating a committee of MPs to oversee the security and intelligence services.

The Cabinet is expected to include a Bill on MI6 in the next Queen's Speech for the 1993-94 session of Parliament in November. It was forced to delay the introduction of the legislation to impose statutory powers over MI6 because of the Scott inquiry into the Matrix Churchill case, in which MI6 was involved in giving early warnings to the Government about the sale of arms equipment to Iraq.

'It would have been too embarrassing for the Government to have the two running simultaneously,' a Whitehall source said. 'The security services are relaxed about the allegations of the bugging of the Royal Family. But they are deeply worried about the Matrix Churchill affair.'

The Bill, which will have cross-party support, will be introduced after the Scott inquiry has reported. But ministers are also having to consider separate demands for a committee of MPs to oversee the budget and management of MI6 and MI5, which is already covered by statutory powers under the 1989 Security Service Act.

The Prime Minister favoured establishing a hand-picked cross-party committee of privy councillors, comprising peers and senior MPs, including Sir John Wheeler, former Tory chairman of the Commons Select Committee on Home Affairs.

But there were renewed protests from MPs yesterday that this did not go far enough, including Clive Soley, the Labour sponsor of a Bill on press freedom, who said oversight should be handed to a select committee. Some sources said that the security services would prefer to answer, in private, to the Commons Home Affairs Select Committee, chaired by Sir Ivan Lawrence QC, a Tory MP. Another option would be for oversight by the select committee on defence chaired by Sir Nicholas Bonsor, a Tory backbencher.

However, Kenneth Clarke, the Home Secretary, is becoming more resistant to the idea of oversight of the services by Parliament. It is more likely the Cabinet will be urged to limit the changes to putting MI6 on a statutory footing and, like MI5, appointing a statutory commissioner to report annually to Parliament.

A separate commissioner reports on the operation of warrants for telephone taps, under the Interception of Communications Act, 1985. Sir Thomas Bingham, Master of the Rolls, in his report in March, said: 'From time to time, stories are published in newspapers describing interception said to have been carried out by GCHQ or by . . . MI5 and MI6. Such stories are, in my experience, without exception false.'

Downing Street said that amounted to a denial of reports that MI5 had bugged the Royal Family. In January, Peter Brooke, Secretary of State for National Heritage, told MPs: 'I give the House a categorical assurance that the heads of the agencies involved (MI5 and GCHQ) have said that there is no truth in the rumours.'