In a stinging attack, she warned it was using the spectre of terrorism to frighten Britons into accepting greater state powers.

And she said policy-makers were doing exactly what terrorists wanted by clamping down on individual freedoms.

Dame Stella became the first woman director general of MI5 in 1992, holding the post until her retirement in 1996, and the first whose appointment was made public.

She said: “Since I have retired I feel more at liberty to be against certain decisions of the Government, especially the attempt to pass laws which interfere with people’s privacy.

“It would be better that the Government recognised that there are risks, rather than frightening people in order to be able to pass laws which restrict civil liberties, precisely one of the objects of terrorism: that we live in fear and under a police state.”