When guide dogs are retired from service, it is common for them to enter a state best described as old-aged adolescence. As they begin to understand that they're no longer responsible for the safety of their owner, the dogs can become almost puppyish, amazed by the unfamiliar freedom of irresponsibility.

It's now 12 years since the first ever female, publicly named director general of MI5 retired from duty, and when we meet this week she is unrecognisable from then. The severe-looking woman with the brutally sensible crop and the dry, institutionalised reserve has softened into velvety folds of laughter, and a warmly engaging ease. Stella Rimington has just published her fourth novel, Dead Line, an elegantly pacy thriller starring a female MI5 agent, and at 73 she gives the impression of someone enjoying the novelty of speaking her mind. The effect is not strident so much as touching. Usually when people are being interviewed, you can see them telling themselves not to say too much, but before Rimington answers a question she often seems to be reminding herself that she really can let go.

"Yes, it is a gradual process," she agrees, smiling. "The shades of one's former existence do hang around for quite a long time. It takes a long time to get rid of that. And I still haven't entirely got rid of it."

She isn't doing badly though. She spoke out against 42-day detention last month, and this week welcomes the government's climb-down unequivocally. "We shouldn't introduce new intrusions into our civil liberties unless they are absolutely necessary - and nobody had demonstrated that they were necessary. If there isn't any need, then don't move the boundaries." She argues that we should "treat terrorism as a crime, and deal with it under the law - not as something extra, that you have to invent new rules to deal with." She is opposed to ID cards, because she can't see how they could be "a significant counter-terrorist measure", and although she admits she's "had more time to think about it since I left the service", she says her attitude to civil liberties has always been liberal. The big change, she argues, has been not her position, but the politicisation of the issue.

"One of the things I have observed in the last few years, since I left, is that national security has become much more of a political issue. And that parties are tending to use it as a way of trying to get at the other side. You know," she adopts a mocking playground tone, "'We're more tough on terrorism than you are.' I think that's a bad move, quite frankly.

"After the vote in the House of Lords, one heard the home secretary saying something like, 'Well nobody can say I'm not tough on terrorism'. As though the implication was there are people who aren't. Which strikes me as very odd. Because most of the people in the House of Lords whose contributions to that debate I'd read were serious people, who'd possibly spent a life, as I have, trying to protect the country from serious threats. So the implication that, you know, a politician was going to say 'I'm tougher on terrorism than you are' struck me as ... " and she flicks a wrist, batting away the boast with the back of her hand like a fly. "And it's happened broadly since 9/11."

The response to 9/11 was "a huge overreaction", she says. "You know, it was another terrorist incident. It was huge, and horrible, and seemed worse because we all watched it unfold on television. So yes, 9/11 was bigger, but not ... not ..." Not qualitatively different? "No. That's not how it struck me. I suppose I'd lived with terrorist events for a good part of my working life, and this was, as far as I was concerned, another one."

Rimington hopes President Bush's successor will stop using the phrase "war on terror". "It got us off on the wrong foot, because it made people think terrorism was something you could deal with by force of arms primarily. And from that flowed Guantánamo, and extraordinary rendition, and ..." And Iraq, I suggest. "Well yes," she says drily. "Iraq."

Jacqui Smith gave a speech this week on international terrorism which rather remarkably failed to mention the war in Iraq at all. I ask Rimington what importance she would place on the war, in terms of its impact on the terrorist threat. She pauses for a second, then replies quietly but firmly: "Look at what those people who've been arrested or have left suicide videos say about their motivation. And most of them, as far as I'm aware, say that the war in Iraq played a significant part in persuading them that this is the right course of action to take. So I think you can't write the war in Iraq out of history. If what we're looking at is groups of disaffected young men born in this country who turn to terrorism, then I think to ignore the effect of the war in Iraq is misleading."

These might not be unremarkable views for most Guardian readers - of whom Rimington is one. But according to Rimington, they are widely held within the intelligence service - much more so than most members of the public, and perhaps particularly Guardian readers, ever suspect.

"I don't think I'm unusual, frankly. It's the general public's, or whoever's it is, view that's out of date." She points out that Baroness Manningham-Buller, another former head of MI5, has been "saying broadly the same things. I think what that reflects is that the caricature of the service is out of date now.

"People [in the intelligence service] are very conscious of the possibility of intrusions into civil liberties - and therefore the importance of restricting that to the extent of what's strictly necessary. I think people are fully aware that the more you intrude into people's civil liberties, the more you set up grievances for people to, you know, encourage people to do all the unpleasant things that are going on."

At times the picture Rimington paints of MI5 seems almost too good to be true. She has always said she never carried a gun; none of her agents were ever killed; MI5 does not kill people; it does not spy on the prime minister - not even Harold Wilson - or even vet BBC journalists (even though the BBC has admitted submitting names for vetting). As I run through the list, she anticipates the next question, and grins: "So what do we do?" No, I say. My point was going to be that, well, you would say that, wouldn't you?

What I mean is that we all know she's not at liberty to tell the whole, unedited truth about her old job - so how can we know how much of her account to trust? She looks hurt, and then insulted.

"Why would I wish to engage in this and tell you a load of garbage? It would be a waste of everyone's time, including my own. Maybe what you ought to be looking at is, are you pursuing a myth about what British intelligence does? Are you still back in the days when people thought that we were like the Stasi? If that's where you're coming from then you shouldn't be surprised when my answer to your questions is no that doesn't happen. Because it doesn't.

"The point I'm making is that if journalists ask me certain questions and get the answer no, could it be that they're asking the wrong questions? You're assuming if you get the answer no, I'm saying we don't do anything - so I must be lying. But the thing is subtle. If the answer's no, it's because the question isn't the right question." Has she ever given an untrue answer to a question? "I'm not in the business of giving untrue answers," she says coolly. "I don't think it's helpful."

Rimington has herself, though, been on the receiving end of some deliberate unpleasantness from her old service, and admits it shook her. In 2001 she wrote her autobiography, infuriating her former employer - and when she submitted the manuscript for clearance, someone put it in a taxi and sent it to the Sun. Suddenly, she discovered what it felt like to be on the wrong side. I ask if the experience had ever made her reconsider or doubt anything she'd done in office.

"I don't think I doubted anything we'd done," she says quickly. "But - well, I think I maybe did think more about people's reaction to the secret state. When you're in the secret state you are, hopefully, pretty confident of the probity of everything you're doing, and the reason for it. And perhaps you don't think that much about how it looks to people outside. Not that I think you necessarily should be thinking that - because it's not your role.

"But I think I had this sense suddenly that, having been in the heart of it, here I was on the outside submitting this manuscript to the system and I had no control or knowledge of what was going on in that system. And I thought, hmm, I think this must be how people feel when they're dealing with the state machine in many of its manifestations - this Kafka-esque thing."