The inquest into the deaths of the Manchester Arena bombing victims could hear "embarrassing" evidence of the "shortcomings" of the security services, a court has heard.
John Cooper QC, representing some of the families of the victims, told a pre-inquest hearing at Manchester Town Hall that full transparency is required when the full inquest, set for April next year, is heard.
The pre-inquest review, the third, was attended by some of the families of the 22 people murdered by suicide bomber Salman Abedi, 22, at the end of an Ariana Grande concert on May 22 2017.
Most of the three-hour hearing dealt with administrative matters but also heard from lawyers from the Crown Prosecution Service, Greater Manchester Police and HM Government.
The question of public interest immunity - whether sensitive information relating to terrorism and national security is heard before the press and public at the inquest - was also discussed before a decision is made by the coroner, former High Court judge Sir John Saunders.
Mr Cooper told the coroner: "The demonstration of transparency is at its highest in a case such as this.
"There is already, in documents disclosed to us, significant material which is, if I may put it this way, of embarrassment to the security services, potentially to the police and certainly to the medical emergency services.
"And we urge you to always bear in mind a rider that national security not be confused with national or personal embarrassment.
"National security is a very defined concept; it shouldn't wittingly or unwittingly be used to restrain material which may further expand upon the failings of the security services, emergency services and the failings of others.
"We already have significant material which exposes shortcomings of the security services, of the emergency services and others.
"If I can put it inelegantly, the cat is already out of the bag."
An earlier pre-inquest hearing, in February, was told there will be a "most vigorous" investigation into whether the attack could have been prevented, and the information held, and actions taken, by the police and security services.
Sir John said a decision on which evidence is heard in public and which in private will be deferred until later in the year.
Last week, the bomber's younger brother, Hashem Abedi, who was in Libya at the time of the attack, was extradited from Tripoli and appeared in court in the UK for the first time.
The court heard that Abedi, 22, denies helping his brother carry out the attack.
He is charged with 22 counts of murder and will next appear before a judge at the Old Bailey on Tuesday July 30.
Families of the victims have become frustrated at the lack of progress on holding the inquests, left in limbo before the police investigation concludes and trial of any suspects is held.
Sir John told the families that "as far as possible" nothing should delay the inquests, scheduled to begin on April 2 next year, after the trial of Hashem Abedi has concluded, which may begin earlier in the new year and last around six weeks.
Paul Greaney QC, counsel to the inquests, also raised the matter of legal funding for those whose loved ones died in the bombing.
He said: "Certain bereaved families are concerned about difficulties in receiving funding from the Legal Aid Agency.
"Those legally representing them have been working without funding for a considerable period of time."
A further pre-inquest hearing will be held on September 6.