NEW laws which could have allowed parts of the 7/7 inquest to be heard in secret were today dropped by ministers in a second dramatic U-turn over anti-terror legislation.

Home Secretary Jacqui Smith was planning to use a clause in the Government's controversial counter-terrorism bill to give coroners the power to hear inquest evidence in private on the grounds of national security.

The aim was to ensure that sensitive intelligence material, such as phone-tap evidence, could be submitted without being divulged to jurors or other members of the public.

Today, however, she was forced to remove the plans, which have sparked fierce opposition from some victims of the 7/7 attacks and opposition politicians, from the Home Office's current Anti-Terror Bill. Officials insisted that the provisions would now be inserted into a forthcoming Ministry of Justice Bill instead, but the decision represents a second retreat by ministers in less than 24 hours over the key elements in its flagship legislation.

The climbdown follows last night's decision effectively to abandon prop-osals to extend the pre-charge detention limit from 28 to 42 days after a crushing rejection by a 191-vote majority in the Lords and will be seized on by the opposition as further evidence of government disarray over counter-terrorism laws.

Clearly angry at the defeat, Ms Smith declared that she would draft a separate Bill that would be brought forward in a national emergency.

It is understood the new Bill will not contain many of the civil liberties safeguards extracted by Labour MPs.

Ms Smith's plans were dismissed by opponents as a "fig leaf" to save face for the Home Office and Labour and civil liberties critics warned a revival of the plans would be fought all the way.

Speculation had been rife that the 42-day detention measure, which scraped through the Commons by a majority of only nine, would be dumped after the Lords vote left Ms Smith little choice.

The Lords defeat was spearheaded by senior figures including two former MI5 directors, two ex-Lord Chancellors, a former chief constable and former attorney-general, Lord Goldsmith.

Ms Smith accused opponents of ignoring the threat of terrorism. "I do not believe that it is enough to simply cross our fingers and hope for the best." Some may take the security of the British people lightly. I do not," she said. However, she conceded that many of the peers who had voted against including former MI5 chief Dame Eliza Manningham-Buller had a "proud record" in defending Britain against terror.

Shadow home secretary Dominic Grieve rejected the charge that opponents of 42-day detention were weak on terrorism. "We are perfectly prepared to be firm on terrorism and, if necessary, pass difficult Bills," he said. "But they have to be credible."

Shami Chakrabarti, director of campaign group Liberty, said the campaign would continue: "If any government tries this again we will be ready."

Former shadow home secretary David Davis, who resigned his seat and successfully fought a by-election on the issue, said: "The Government has undertaken a spectacular climbdown."

• 

  Supersize superport: London Gateway

  London Gateway, the £1.5bn container port under construction on the Thames at Thurrock, will have capacity to unload six of the world's largest ships at one time and have as much impact on the capital as a new airport or half a dozen Westfield shopping centres

  ---

• 

  One stylish affair: Matthew Williamson

  With London Fashion Week kicking off on Friday, British designer Matthew Williamson tells Rosamund Urwin about breaking up with his ex, post-show partying and his new model man

  ---