Britain's enemies are "rubbing their hands with glee" over whistleblower Edward Snowden's NSA leaks, the MI6 chief said.
GCHQ have launched an online code breaking competition to find people capable of joining the Government's national cyber security teams.
The Foreign Secretary said British intelligence would never use its partnership with the United States to get around UK laws.
The technology used by Britain's intelligence agencies is "out of control", former Liberal Democrat leader Lord Ashdown has warned.
Lord Ashdown, a former special forces soldier and spy, called for an inquiry to address questions of privacy in the digital age.
He said surveillance should be targeted against individuals or groups, not against "the whole nation" as recent operations exposed by whistleblower Edward Snowden were.
But in an interview with The Guardian, which has revealed details of the activities of British eavesdropping agency GCHQ based on documents disclosed by US intelligence whistleblower Mr Snowden, Lord Ashdown defended the right of the state to intercept communications.
Two Conservative MPs have written to the editor of the Guardian to urge him to "acknowledge the devastating assessment" by Britain's spymasters of the damage caused by the publication of leaks by the former US intelligence operative Edward Snowden.
Tories Julian Smith and Stephen Phillips called on Alan Rusbridger to clarify whether he had "acted on every security concern raised by Government" over news stories.
They wrote that Rusbridger "fails to acknowledge the devastating assessment of the damage done to the national security of the United Kingdom by The Guardian's reporting of the Snowden leaks."
Yesterday MI6 chief Sir John Sawers said the Edward Snowden's leaks "have been damaging and put operations at risk."
Working at MI6 is not like James Bond, one of the security chiefs told MPs that operatives are given far more supervision.
"The idea of sending an agent off into the field like James Bond, then he comes back two months later and reports... that doesn't work that way," Sir John Sawers, chief of MI6, said. "Our people in the field will have constant communication with us."
Sir Malcolm Rifkind has said that security chiefs speaking to MPs in public today was "an historic occasion" that will be repeated.
The Chair of the Intelligence and Security Committee added that he believed those involved were glad of the chance to speak publicly.
He said: "Many of them have been upset at the accusations that they have been doing something improper or doing something unreasonable to their fellow citizens.
"I suspect they were pleased to have the opportunity in public to speak about the work their own staff do and how important it is to the national interest."
Just out of spy chiefs session. Felt key line the attack on Snowden leaks that Al Qaeda would be lapping up, enemies rubbing hands with glee
Spy chiefs clear they believe Snowden leaks & media coverage of it caused damage to their operations. Terrorists now changing communications
MI6 chief Sir John Sawers said the leaks from NSA whistleblower Edward Snowden "have been damaging and put operations at risk."
Al-Qaeda is "lapping up" the leaks and Britain's enemies are rubbing their hands with glee, the British intelligence chief added.
Asked if GCHQ could guarantee it does not operate beyond UK law, Sir Iain Lobban replied: "I can give you that guarantee. I believe that to be true. We are subject to the law."
Some work that GCHQ carries our is "necessarily secret," Sir Iain Lobban said.
"I don't think secret means unaccountable in any sense."
"I don't think secret means sinister," he added.
"We do not spend our time listening to the telephone calls or reading the emails of the majority," GCHQ boss Sir Iain Lobban told the committee.