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In the wake of the July 7 bombings in London, the British authorities' response-including scrutiny of closed-circuit TV footage, scene-scouring for forensic evidence and close attention to phone tips-was a textbook example of good investigative methodology.

But if there's a lesson for the U.S. counterterrorism community after last month's U.K. attacks, it might be that buffed-up budgets and agency reorganizations don't amount to much if they still fail to resolve differences over assessments and use of resources before a terrorist attack.

Just as America has ramped up its counterterrorism spending and started reorganizing its intelligence community, so too has the United Kingdom. After Sept. 11, almost $350 million in additional spending went to MI5 and MI6 (Britain's internal and external intelligence agencies), the London Metropolitan Police special-operations units, SO12 and SO13, which focus on terrorism, and the eavesdroppers at the Government Communications Headquarters.

By 2004, almost 40 percent of British signals intelligence resources were directed toward counterterrorism, and Scotland Yard had a budget of $91 million that included, among other things, 700 additional officers detailed to terrorism.

Just as Congress passed the USA Patriot Act and other expansions of law enforcement and intelligence powers after 9/11, Britain's Parliament retooled parts of its already formidable Prevention of Terrorism Act.

Presaging various U.S. independent agency and commission-driven initiatives, in Britain, MI5 quickly reconfigured part of its counterterrorism operation to become the Counter-Terrorism Analysis Centre-which subsequently went interagency and became the Joint Terrorism Analysis Centre, not unlike the recent U.S. evolution of the Terrorist Threat Integration Center into the National Counter-terrorism Center. Before the U.S. system of color-coded terrorist warnings, Britain instituted its own scheme. And just as a June 29 presidential executive order created the National Security Service-a semiautonomous, MI5-like unit within the FBI-the British two years ago began recombining MI5's organized crime functions with other agencies to create the Serious Organized Crime Agency so the Metropolitan police specialist units and MI5 could focus more exclusively on terrorism. Not unlike the U.S. creation of the Office of the Director of National Intelligence, Britain's Cabinet Office intelligence staff has expanded both its members and mission. And just as U.S. intelligence reforms place a premium on better analytical mechanisms that challenge assumptions and methodologies, earlier this year MI6 resurrected a formal operation to do that, too.

Yet, in the weeks leading up to July 7, the Joint Terrorism Analysis Centre held that a terrorist attack, while inevitable, wasn't likely anytime soon. And almost immediately after the bombing, British officials were admitting that-unlike the Spanish authorities in 2004's Madrid bombings-they had no leads on who the perpetrators were or where they might have come from. So why the blind spots? In part, it was because reforms still have failed to adequately reconcile intelligence assessments and resource decisions, say active and retired U.S. and British security service officers.

Since early this year, the British press has carried reports focusing on disagreements over what the most likely threats were and how best to deal with them-both within agencies and among agency heads and policy- makers. Echoing points made at a public conference earlier this year, an MI5 report expressed concern that small numbers of "cleanskins"-British Muslims, mostly radicalized at home, with no traceable history of extremism and the savvy not to engage in suspicious behavior-pose a likely threat to security. The report also drew attention to an increase in the small but burgeoning number of British Muslims leaving to fight jihad in Iraq and the future threat they might pose to British troops abroad and Britons at home. Not only did British intelligence mandarins find that a more compelling threat, they also reasoned that acts of terror were most likely to come from external teams dispatched from abroad or highly trained sleeper cells acting on direct orders from al Qaeda higher-ups. And, as the Guardian newspaper reported, because the joint analysis center concluded that al Qaeda's leadership has been weakened to the point that it doesn't have the ability to order such an attack, Britain's threat level was reduced from "severe-general" to "substantial."

To those experienced with violent Islamist radicalism in general and al Qaeda in particular, this seems, as the British would say, a bit daft. It appears ever clearer that the increasingly transnational, yet decentralized, cellular structure of Islamist terrorism doesn't necessitate orders from on high. "The idea out there that bin Laden and these guys are still getting together to have a conference to decide what's going to happen is just bizarre," says Jack Cloonan, a retired 27-year FBI veteran. Cloonan investigated the 1998 bombings of the U.S. embassies in Kenya and Tanzania and other terrorism cases as part of the bureau's bin Laden squad in New York. "Thousands of the guys who went through the training camps in Afghanistan were instructed to go back to their countries and do what they were going to do. The sheik doesn't have to give a specific order," he says.

While the efforts of British intelligence services in Islamist counterterrorism have come a long way in recent years, they still suffer from resource and orientation problems in addition to threat interpretation difficulties, says Cloonan. He has worked closely with British security services, including on Operation Challenge, a joint 1998 U.S.-British endeavor that apprehended United Kingdom-based terrorists connected with the embassy bombings. British budgets are paltry compared with those of their American counterparts, he says, and while some individuals and elements quickly grasped the nuances of Islamist terrorism, institutional adaptation hasn't been as fast. "When I first visited SO13's offices in the late 1990s, everything on their walls had to do with IRA terrorism. When I was there last year, a lot of the same stuff was still there," he says. "And there's also a history of rotating people every three to four years, which is a problem in terms of institutional knowledge."

In addition, while British agencies have powers and, in some cases, even resources that are the envy of their American counterparts, they might not always use them effectively. Earlier this year, Parliament approved, with minor tweaks, Home Secretary Charles Clarke's proposal authorizing "control orders" to keep tabs on terrorism suspects for whom evidence that warrants arrest is lacking. Conceived as both a tool of intelligence gathering and of disruption after Britain's highest judicial authority ruled that the government can't hold terrorist suspects indefinitely without trial, these protocols give MI5 and Scotland Yard near-total authority to constantly watch over and inhibit British subjects and foreign nationals with possible terrorist ties.

But according to British press accounts earlier this year, career professionals considered the way they were being directed to apply control orders to be counterproductive. At one point, each of 10 terror suspects with control orders was being watched by three shifts of 20-member teams-600 officers for 10 people, at an estimated cost of $87,500 a day. "There's a feeling within the services that things like this are likely to come at the expense of other more useful endeavors, like investigation, infiltration and intelligence gathering in the corners of London's Islamist community we don't know enough about," a former British security services official says.

Also complicating matters are conflicts between Prime Minister Tony Blair and intelligence agencies, which have grown increasingly resentful of instances when Blair has, in their view, exaggerated threats and sought to put security services' imprimatur on his claims. Earlier this year, the prime minister asserted that "hundreds" of potential terrorists were on the loose, a number the services have no evidence to support, and which was considered a bit of pre-election political pandering.

-- Jason Vest has written extensively on national security affairs for publications including Harper's, The Atlantic Monthly, The American Prospect and The Boston Phoenix.