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Islamic fundamentalism is being allowed to flourish at universities, endangering national security, MPs and peers said yesterday.

Academics are turning a blind eye to radicals because they do not want to spy on students, a report claimed.

Despite “damning evidence” of a serious problem, little progress had been made in tackling the unsustainable situation, the All-Party Parliamentary Group on Homeland Security said.

They urged the Government to tackle the issue on campuses with “utmost urgency”.

Such extremism “endangers our security at home and has international implications that are serious enough to threaten our alliance relationships”, said the group, which includes the former home secretary Lord Reid.1

Secret files obtained by The Daily Telegraph and WikiLeaks disclosed this week that at least 35 terrorists held at Guantánamo Bay were indoctrinated by extremists in Britain.

The leaked documents, written by senior US military commanders, illustrated how Britain effectively became a crucible of terrorism over the course of two decades.

The parliamentary group was set up two years ago to carry out research into homeland security issues.

Its inaugural report comes after a separate inquiry by the umbrella organisation for universities earlier this year said animal rights extremists posed a greater problem than Islamist radicals.

Universities UK, which represents vice-chancellors, said it could do very little about extremism on campus. Instead it issued new guidance on the importance of freedom of speech. Their report followed the attempt by Umar Farouk Abdulmutallab, a former student at University College London, to blow himself up using a bomb in his underpants as a flight came in to land at Detroit on Christmas Day, 2009.

Abdulmutallab, an engineering student, was the Islamic Society president from 2006 to 2007.

The parliamentarians’ report said Britain’s homeland security strategy failed to address in sufficient detail how to tackle the threat of extremism at universities, how to strengthen businesses’ ability to deal with a terrorist attack and how to ensure security over the internet.

The report said some universities and colleges had become sites where extremist religion and radicalism could flourish “beyond the sight of academics”.

They also noted that there was a “reluctance to co-operate with the police on the part of some universities that did not want to be seen to be ‘spying’ on their students”.

The MPs and peers said universities presented a “unique challenge”. However, “in some cases [they] evidently struggle to establish the correct balance between academic freedoms and university authorities’ responsibilities as part of ensuring homeland security.”

In the report, entitled Keeping Britain Safe, the MPs and peers said the problem of universities as places of radicalisation required “urgent and sustained attention by the new Government”.

Several witnesses had flagged up “serious problems” evident in universities and the issue was of “grave concern.” The problems they cited included examples of extremist preachers being invited on to campuses.

Abdulmutallab was only one in a long line of university students to become involved in terrorism.

A recent survey found that 31 per cent of those convicted of terrorist-related offences had attended university and 10 per cent were still students when they were arrested. Two of the July 7 bombers had been students.

Think tanks have highlighted a succession of extremist speakers invited to deliver lectures unopposed at university Islamic societies, including UCL.

Westminster University recently elected students with links to the extremist group Hizb ut-Tahrir as president and vice-president of the student union.

The report also raised “significant concerns” over unregulated foreign funding of universities. It said that, in many cases, the funding had a political purpose and could have direct effects upon the institutional structure, curriculum, appointments and the schedule of events.

The London School of Economics was among the controversial recipients of foreign aid, accepting a donation of £1.5 million from a trust controlled by Col Muammar Gaddafi’s son, Saif.

The report quoted one witness, Prof Anthony Glees, of Buckingham University, who said Arab and other foreign governments had ploughed £240 million into Islamic studies courses at universities over the past 10 years.

The report said the role of businesses in preparing for emergencies such as terrorist attacks was “highly problematic”.

The Government’s new counter-terrorism strategy will aim to “prevent the import and dissemination of extremist written material and speech which promotes hatred” on campus, the report said.

“These are welcome initiatives which must be implemented forcefully,” the MPs added. “This complex subject requires further attention. It has been an obvious and neglected problem for too long and must be tackled as a matter of utmost urgency.”

The report also found that the processes behind the National Security Strategy (NSS) and the Strategic Defence and Security Review (SDSR) were “deeply unsatisfactory”.

“Too much was done in too little time, consultations were not extensive enough and it presents a lost opportunity for a sophisticated debate about internal and external defence,” it said.

Bernard Jenkin, the group’s chairman, said: “The NSS and SDSR are not a satisfactory basis for the UK’s homeland security strategy for the next five years.”