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Baroness Pauline Neville-Jones is chair of the Cyber Security Advisory Panel to the Bank of England and former minister of state for security and counterterrorism. She will be attending the Halifax International Security Forum this weekend.

Today, intelligence has taken a central role in all aspects of national security, both at home and abroad. It is a new condition that is unprecedented in Western democracies and arises directly from Islamist extremism, which has found its latest haven in an increasingly inflamed Middle East.

In its terrorist and criminal form, this extremism is a serious security risk. Even in its nonviolent, ideological form, it is a threat to liberal democratic values, which it seeks to overturn. Its tentacles reach into the streets of communities thousands of kilometres away.

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Using electronic communication and simple organization, terrorists can both recruit and inflict loss of life quite cheaply.

The resources necessary to pursue the perpetrators, counter their vile messages and protect society are very extensive. Moreover, since reliable overt channels of communication are not a feature of terrorist movements, governments are left uncomfortably dependent on intelligence as the primary, uncorroborated source of information for policy-making.

On the face of it, this dependence would seem to argue for further investment in technological development and expansion of our already ballooning intelligence budgets. One day, quantum technology will emerge from its research phase.

While we remain in a digital world, intelligence agencies will certainly need to continue to develop and safeguard their cryptographic capabilities. Beyond that, however, a bigger bang for the buck is more likely to be attained from deploying existing capabilities more effectively: integrating intelligence products more closely with other aspects of policy, while at the same time ensuring its integrity.

At the time of the 2003 war in Iraq, outdated intelligence, lack of ability to test agent information against other sources and misinterpretation of apparent battlefield evidence contributed to policy failure. The misuse of intelligence to drive political argument, as in Britain's "dodgy dossier," left a legacy of mistrust that adversely affects policy options to this day. The value of intelligence – and its reputation – depends on the way it is produced and used.

The stated aim of containing, degrading and destroying the Islamic State in Iraq and Syria is urgent and ambitious. Success depends to a considerable extent on building or rebuilding intelligence assets on the ground.

This means using special forces and training local agents who can be deployed in combination with other intelligence, and military and political assets. Early outcomes will not be visible in this painstaking task, which should cover other friendly Middle Eastern and Persian Gulf countries ahead of a further shift of fighters as they begin to be squeezed.

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As the base is laid, however, the speed of degradation should accelerate. It should help cut at one of its sources, the poisonous propaganda stream, and disrupt the two-way flow of recruits. However, the flow will not stop until agencies in countries of recruitment and passage have developed much greater situational awareness of their domestic security scene, have sped up the exchange of information and are operating much more effective border and policing controls than they currently do.

And, unless there is going to be wholesale resort to executive detention, which tends to create martyrs and is ultimately unsustainable, police must be trained to obtain evidence that is both usable in court and robust enough to obtain convictions.

Developing a sense of shared mission with ethnic communities is vital, since a good part of the grossly underdeveloped work of deradicalization or, better, prevention of radicalization, has to take place there.

In many countries, agencies could make a much more significant contribution. Much intelligence drops onto the cutting-room floor unused because its value to those parts of government tasked with identifying the purveyors of ideological extremism is not recognized. Rightly, that is not part of the agencies' own remit.

It makes no sense, however, for government to devote extraordinary resources to overcoming the violent effects of extremism while neglecting to exploit intelligence available about fundamental drivers. Terrorism poses public authorities with a challenge that most find very hard to meet: effective information-sharing and co-ordination of the instruments of policy, both internationally and domestically, right across departmental stovepipes and into communities. Without that, a lot of intelligence will be wasted.

Governments have already had to alter laws and institutions to release the state's capability to meet the threat. But the focus on domestic security has also brought controversy.

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Paradoxically, the more governments succeed in threat reduction and the less apparent the threat, the more onerous the accompanying invasion of privacy and constraints on civil liberties can seem.

The ability to scan and collate data communications nevertheless remains vital, and the way forward cannot lie in blocking it so much as ensuring that the legal framework is clear and accountability rigorous; that agencies are tasked only to genuine priorities; and that the processes involved in producing and using intelligence are operated proportionately.

Bringing about greater transparency will be the best antidote to a corrosive belief in Big Brother tactics. This is a long haul, and the state has to make itself fit for purpose.

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