Sinn Fein portrayed Mr Blair's announcement as a victory over the SDLP because it drastically reduces the scope for direct contact between PSNI officers and MI5.

Contact between the organisations will take place through PSNI liaison officers, based at their own headquarters up the hill from MI5's new base at Palace Barracks in Holywood.

Prior to the announcement, the position had been that PSNI officers would work directly with MI5 in the analysis of intelligence, including the secondment of police officers to MI5, after the security agency takes charge of anti-terrorism later this year.

The SDLP argument was that this was a better way to ensure effective scrutiny of MI5 - where PSNI officers go, Ombudsman Nuala O'Loan's investigators could follow.

While Mr Blair said there will be "arrangements" to allow Mrs O'Loan access to Security Service intelligence "where necessary", there is no legal basis for that co-operation.

Lord Carlile, a Liberal peer, will annually review MI5's role in Northern Ireland, but it did not appear from yesterday's announcement that he would investigate specific complaints in the same way as Mrs O'Loan.

Sinn Fein's Gerry Kelly said yesterday's announcement was a reversal of plans in the St Andrews Agreement to integrate the PSNI and MI5, plans that would have recreated the scenario that existed with RUC Special Branch.

SDLP leader Mark Durkan said the decision "does not sort out MI5" and actually damages accountability. He argues that while Mrs O'Loan could pursue complaints against PSNI intelligence handlers today, she won't be able to investigate MI5 equivalents when they take over national security arrangements.

In practical terms, Mr Blair's decision means that MI5, already recruiting for its Northern Ireland operation, will end up employing more people - in many cases, former RUC Special Branch officers.

Security and official sources also say that five principles for intelligence sharing, announced in the St Andrews Agreement, will stand.

Crucially this would mean the PSNI will continue to run "the great majority" of national security informers and conduct arrests for MI5.

Mr Kelly says MI5 has been removed from "civic policing".

He said: "Our objective has been to firewall local policing from the malign and corruptive control of MI5. The proposals remove MI5 from policing structures in Ireland."

Mr Durkan said: "There is a coincidence of interest between Sinn Fein and the British Government on this. The latter want to promote and protect the primacy of MI5 in intelligence gathering into the future. Sinn Fein partisan propaganda purposes require a fig leaf."

No doubt the arguments in nationalism will continue. But in the disputes over the detail, the Government will still wind up keeping its secret operations well beyond the reach of politicians at Stormont. And that may make them the ultimate winner.