The Parliamentary watchdog responsible for security accused the Government yesterday of manipulating intelligence on Iraq while failing to provide political leadership for the war on terror.

In a hard-hitting annual report, the Intelligence and Security Committee (ISC) censured Downing Street for publishing a dossier on Iraq's weapons in which security information was combined with a student's thesis that was taken from the internet.

At the same time, there was strong personal criticism of Tony Blair for failing to hold a meeting of a cabinet committee set up to combat terrorism.

The report portrays a government willing to spice official intelligence with uncorroborated material, while ministers remain badly informed and "not sufficiently engaged" in the fight against groups such as al-Qa'ida. It maintains that senior ministers did not read all the espionage material available to them, including vital intelligence in tackling weapons of mass destruction.

The ISC said it decided to highlight the crucial Downing Street document on Iraq - the so-called dodgy dossier published in February - after consultations with members of the intelligence community.

The committee was so worried by the additions to the initial intelligence information - made by a team under Alastair Campbell, the Prime Minister's communications director - that it had obtained reassurance it would not occur again.

The report states: "It is imperative that the agencies are consulted before any material is published. This process was not followed. We believe CSI ministers are not sufficiently engaged in the setting of requirements and priorities for secret intelligence."