By Gordon Corera
BBC News security correspondent
Planned job cuts could undermine the UK's intelligence performance, former top security officials have warned.
The DIS assesses intelligence from agencies such as GCHQ
A reduction of 121 posts has been proposed for the Defence Intelligence Staff (DIS) which analyses information from GCHQ, MI6 and the MoD.
John Morrison, former Deputy Chief of Defence Intelligence, said the losses would be "ludicrous" and mean giving up large areas of the DIS's work.
The MoD insisted intelligence capability would not be compromised.
The cuts in the London part of the DIS amount to a staffing reduction of more than 20%.
If carried out, it is feared it would fall heavily on the cadre of intelligence analysts. This, it is argued by critics, will have a "very serious impact on capability".
The DIS provides assessments not just for the Ministry of Defence and the armed forces but the entire UK intelligence community.
DIS staff are the main source of expertise within the intelligence community on subjects such as the science and technology of weapons systems and arms proliferation.
They also provide direct support to UK operations overseas including Afghanistan and Iraq.
The union Prospect responded by saying such cuts "would seriously undermine the quality of assessed intelligence provided to both the MoD and to the UK's central intelligence apparatus".
It added: "Cuts of the size envisaged are likely to mean either that the DIS loses important perspectives to its work or it simply does everything less well.
"Either way greatly increases the chances of an intelligence failure and is likely to lead to less well-informed operational planning, policy-making and procurement decisions.
"It will also weaken the UK's efforts to counter weapons proliferation, narcotics and terrorism."
'It is nonsense'
What has particularly angered some former intelligence officials is that the cuts come out of a Ministry of Defence streamlining plan which they say aims to squeeze staff into fewer buildings in London with little view as to how this affects the rest of the UK intelligence community.
Mr Morrison told the BBC: "It's totally ludicrous and it just seems to be a desire to come down to only one building, the main building, which simply isn't big enough to hold all the DIS and therefore they must be cut. It is nonsense.
"It would mean that the DIS would have to give up large areas of work at a time when the requirements levied on the intelligence community are growing continuously.
"It would simply have to stop working in large areas. Not least because it's almost one person thin in several areas and you can't say 'we'll take one of two people out and let the other person get on with it'. There is no other person.
"It is really a unique centre of expertise for the UK."
The cuts risk causing an imbalance, according to a number of former officials.
That is because other parts of the UK intelligence community which collect intelligence in the first place - for instance GCHQ which listens in to communications or MI6 which recruits human informers - are growing rapidly and have been given more resources since 9/11.
But it is organisations like DIS, as well as assessment staff at the Cabinet Office, who actually analyse all the information based on their technical expertise and decide how important it is.
The combination of growth in collection and cuts in analytical capability means, in the words of the union document, "much of this expensively gathered intelligence will no longer be adequately assessed, and in some cases it may not even be read".
The cuts also risk damaging relationships with other countries through which the UK receives intelligence in exchange for what it provides, some of which is generated by DIS.
According to the Butler Review into the failures over Iraq's weapons of mass destruction (WMD), the DIS is a "vital component of and contributor to the national intelligence machinery".
The Butler Review was critical of the way in which the key intelligence that formed the basis of the government's September 2002 dossier was withheld from the experts on weapons of mass destruction in DIS.
"The fact that it was not shown to them resulted in a stronger assessment in the dossier in relation to Iraqi chemical weapons production than was justified by the available intelligence," it reported.
The review called for further steps to integrate the DIS into the rest of the intelligence community, possibly by funding it separately from the rest of the MoD.
Dr Brian Jones, who ran the WMD branch at the time of the Iraq dossier, said that the problem of a lack of integration talked of in the Butler Review had only been further highlighted by the current talk of cuts.
"As if to prove the point, the recommendations Butler made to remedy this have either been set aside because they did not suit the MoD, or totally ignored," he told the BBC.
Prospect has also written to the Intelligence and Security Committee which oversees the work of the intelligence agencies to ask it to examine the impact of the cuts on the wider UK intelligence community.
In response, MoD officials argue that all parts of its head office are being reviewed for possible cuts to improve efficiency and that it is premature to say what those cuts might be.
In a statement, the MoD added: "No decisions have been taken and intelligence capability will not be compromised.
"Streamlining is not about reducing high-priority defence outputs, it is about achieving those outputs more effectively.
"We recognise the DIS contribution to the wider intelligence community and there would be wide consultation with the intelligence and security community to determine any impact of change."