Margaret Thatcher personally supported one of her MP’s who had an alleged “penchant for small boys”, MI5 files disclosed to a public inquiry reveal.

An MI5 lawyer told the Independent Inquiry into Child Sexual Abuse (IICSA) it was “a matter of regret” that the service considered only the national security implications of allegations of possible child abuse by Peter Morrison, Conservative MP for Chester, and did not pass information to the police.

The lawyer said MI5’s review of its files uncovered no evidence to indicate the existence of a Westminster paedophile network and nothing to suggest any attempt to cover up a child abuse ring in parliament.

But the witness, who gave evidence anonymously, admitted that memos and a letter from 1986 had discussed claims that Morrison had a “penchant for small boys”, and there was nothing to indicate MI5 passed the information in its possession to police.

The inquiry heard that two 1986 memos were written by Eliza Manningham-Buller, who went on to be the director general of MI5 between 2002 and 2007.

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Her role, the inquiry was told, would have been confined to passing on information, rather than making decisions on what to do about the MP, who had been one of the first backbenchers to urge Thatcher to stand for the Tory leadership in 1975 and her parliamentary private secretary in 1990.

In one 1986 memo, the future Dame Eliza stated Morrison had told her he was being doorstepped by reporters seeking comments about five-year-old allegations that the press had become keen to publish now former Tory deputy chair Jeffrey Archer had been caught paying off a prostitute.

The inquiry heard Ms Manningham-Buller wrote that Morrison did not tell her what the allegations involved, adding: “Peter hoped the press would publish something so that he could sue and nail the lies that were being spread about him.

“The prime minister was aware of it and was supporting Peter.”

Admitting that in the 1980s the service considered the allegations only in national security terms, the MI5 lawyer said: “It’s a matter of regret that no consideration was given at the time to the criminal aspects of the matter.

"The knowledge and understanding of child sexual abuse at the time was much, much lower than it is now. So I’m to some extent unsurprised that wider consideration wasn’t given in 1986. With hindsight, it’s a matter of real regret.”

The MI5 lawyer added that MI5’s reasoning in 1986 would have been: “If the prime minister [Thatcher] knew of the allegations and was not particularly, on the face of it, concerned about them, if this is a true account of the situation, then there would be little point in MI5 investigating them further.”

Brian Altman QC, lead counsel to the inquiry, also quoted from the 2014 independent Wanless-Whittam review of information held in connection with child abuse between 1979 and 1999, which had summarised MI5’s handling of the Morrison allegations by saying: “In response to claims from two sources that a named member of parliament has ‘a penchant for small boys’ ... Matters conclude with acceptance of his word that he does not, and the observation that ‘at the present stage … the risks of political embarrassment to the government is rather greater than the security danger’.”

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Mr Altman said: “The risk to children is not considered at all.”

The witness said that if the same information came into MI5’s possession today, it would be referred to police.

Mr Morrison, who between September 1986 and June 1987 was deputy to Conservative party chair Norman Tebbit, was knighted in 1991 and died in 1995 aged 51.

The inquiry has already been told by Mr Altman that there will be exploration of “whether there was a culture whereby people of public prominence were shielded from investigation at the expense of their victims”.

Mr Morrison is forming one of three case studies, along with the late Liberal MP Cyril Smith and Green Party member David Challenor who was jailed for 22 years in August after being convicted of sexual assault against a 10-year-old girl.

Mr Altman said a question by Labour deputy leader Tom Watson in the House of Commons in 2012, in which he said there was “clear intelligence suggesting a powerful paedophile network linked to parliament and No 10”, could be seen as the “catalyst for the establishment of this inquiry”.

But he clarified that some allegations had already been shown to be false.

Geoffrey Robertson QC, acting for Harvey Proctor – whose home was raided under the Metropolitan Police’s Operation Midland before the probe closed in 2016 without a single arrest – claimed Mr Watson and “various febrile journalists” had “started a moral panic” over an alleged paedophile ring.