Evidence from telephone taps and other surveillance should be permitted in legal hearings to freeze terrorists’ assets, Jacqui Smith proposed yesterday.

The move would increase the use of “intercept” evidence in court, although the Home Secretary is still believed to be reluctant for it to be used more widely in terror trials.

She wrote wrote to opposition parties yesterday, asking for their views on the proposal, which she said could be included in a counter-terrorism Bill likely to be published in the new year.

Ms Smith said in her letter that intercept evidence was already used in control order cases, deportations and hearings over whether terror organisations should be banned. It would be a significant departure to introduce it in asset-freezing applications.

“Presently there is no mechanism in legislation to safeguard the use of closed-source material in civil court proceedings relating to terrorist asset freezing cases, nor may intercept product be relied upon to support the asset freezing decision,” Ms Smith wrote.

“We intend to amend the Regulation of Investigatory Powers Act 2000 so as to allow reliance on intercept in such cases . . . and to put in place a procedure to govern legal challenges to asset freezing decisions, which will afford the appropriate protection to sensitive materials and capabilities.”

This would include measures to allow hearings to be held in private and for defendants to be represented by security-vetted lawyers, known as “special advocates”, her letter said.

Civil liberties campaigners and others have argued for wider use of intercept evidence as an alternative to extending the 28-day limit on precharge questioning, arguing that it would make it easier to secure convictions.

David Davis, the Shadow Home Secretary, said: “The Home Secretary supports the use of intercept for deportation, control orders, banning terror organisations and now even wants to change the law to use it to freeze terrorist assets. Yet she stubbornly refuses to lift the ban on intercept in order to prosecute terrorists. This can only be based on grounds of political expediency, not national security.”

Earlier, David Winnick, a Labour backbencher, told Ms Smith that parliamentary oversight proposed as part of plans to extend to 42 days the length of time terror suspects can be held was a cosmetic exercise as, by the time MPs voted, a suspect might already have been detained for 42 days.

But Ms Smith told a committe of MPs that the “spectre of future scrutiny” would hang over any decisions.

Under the government plans, the Home Secretary would be able to allow a terror suspect to be held without charge for up to 42 days if a joint report by a chief constable and the Director of Public Prosecutions supported it.

The decision would need to be approved by both Houses of Parliament within 30 days.

Ms Smith admitted that this meant it would be possible for someone to be held for 42 days before Parliament even voted on the matter. But she said that having to answer to Parliament would put pressure on the home secretary making the decision, who would know they had to be accountable.

For any detention longer than 28 days, there would have to be an application to a judge, an adversarial hearing and a judicial agreement.

Mr Winnick suggested that the 42-day figure had been chosen as it was the one most likely to gather sufficient Labour backbench support.

But Ms Smith said: “It is being done, not to buy political support, but to provide the police and those that we task with protecting us from terrorism with the tools that they need to do the job.”

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