The full extent of MI5's knowledge of the July 7 suicide bombers and its failure to pursue them as priority targets can now be revealed.

The truth about the failure of Britain's intelligence agencies to investigate the July 7 terror cell had to be kept secret because of reporting restrictions surrounding the fertiliser bomb plot trial.

Mohammed Sidique Khan, the ringleader of the July 7 bombers, was a close associate of the leader of the fertiliser cell, Omar Khyam, at a time when he was one of Britain's top terror targets.

The two met each other at least four times in England while Khyam was under surveillance by MI5 in the final stages of his plotting.

At one point they were recorded by security service agents talking about terrorism.

Khyam also met another of the July 7 suicide gang - Khan's righthand man, Shehzad Tanweer - while under surveillance by MI5.

Yet neither Khan nor Tanweer were classified as priority targets by the security services.

Graham Foulkes, who lost his 22-year-old son David in the attacks, said that when he learned of the truth about July 7 he was "absolutely overwhelmed with a sense of sheer disbelief".

He said: "The consequences of that level of incompetence were such that my son was killed. That is truly appalling.

"Could the bombings have been prevented? As a father who lost a son, I am drawn to that conclusion."

Once the investigation, codenamed Operation Crevice, had wound up, it was MI5's responsibility to assess the threat posed by those on the fringes of the operation and decide what level of resources to devote to investigating them.

But the service decided Khan and Tanweer were "peripheral"

figures. They were listed among the dozens of "desirable" rather than core "essential" targets and, as a result, were able to slip through the net. Within 16 months they went on to kill 52 innocent people in the first suicide attack on European soil.

Khan and Khyam also attended a terror training camp together in Pakistan - a full two years before the July 7 bombings.

Crucial opportunities to identify Khan as a serious terror threat in the months before July 7 were missed.

A photograph of him was circulated by MI5 to intelligence agencies around the world in early 2005 yet, astonishingly, it was not shown to the one witness who could have positively identified him.

American Mohammed Babar, the "supergrass" in the fertiliser trial, had been to the same training camp as Khan and Khyam. After his arrest, he told the authorities that Khan, whom he knew as Ibrahim, was "trouble"

and "should be checked out".

But he was never shown Khan's picture by the FBI.

Babar was later said to have been angry about this failure when he heard that Khan led the attacks on London.

In its official report on the bombings, the parliamentary Intelligence and Security Committee (ISC) described this as a "missed opportunity" to identify the man who would go on to lead the biggest mass casualty terrorist attack Britain has ever seen.

In the wake of the bombings, the Government insisted there had been no warning of the attack. The bombers were said to have been "clean skins" who had never made any significant impression on the intelligence radar before.

Yesterday's revelations will throw into doubt MI5's ability to protect Britain from terrorism and heap pressure on its head, Jonathan Evans, who took over from Dame Eliza Manningham- Buller just days ago.

He served as her deputy during part of the period in question.

Dame Eliza announced last year that she would be leaving, with some commentators alleging she was quitting just as the truth was about to come out.

Her departure is now likely to be seen as an attempt to allow the service to start "with a clean slate".

Furious survivors and grieving relatives renewed their calls for a public inquiry into the bombings.

Rachel North, who survived the blast on the Piccadilly Line train, said she was "very shocked" and "appalled" when she first learned the truth about Khan and Khyam.

She said it now appeared July 7 could have been prevented.

"This has fuelled my desire for an independent inquiry because it appears we have not been told the truth about what happened and what we knew about these bombers prior to July 7," she said.

Mr Foulkes, whose son, a media sales manager for The Guardian in Manchester, was killed in the Edgware Road blast, added of Dame Eliza's departure from the top job at MI5: "She has fallen on her sword. I think she jumped before an inquiry was held, which undoubtedly would have criticised her personally."

Shadow home secretary David Davis promised to table a series of parliamentary questions and called for an independent inquiry.

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To see a video of Omar Khyam inspecting the chemical fertiliser he intended to use to in a major campaign of terror, click here.