The police risk damaging their credibility and community relations when they make mistakes in their use of anti-terror laws or use them for non-terrorism purposes, the government's terror law watchdog warned yesterday.

In his annual report on the operation of the anti-terror laws, Lord Carlile said that the misuse of stop and search powers under section 44 of the 2000 Terrorism Act could fuel demands for its repeal.

The Liberal Democrat peer also said customs officers were so thin on the ground at some British airports that they were no discouragement to terrorists, and expressed concern about the risk of terror groups hijacking executive jets. The evidence of a shortage of customs officers came from his own failure to find somebody at Heathrow to whom he could declare some gifts he was bringing into the country earlier this year.

He also made it clear that, based on his access to security briefings and secret material, he believed the risk of terrorist attacks on public places in Britain remained real and there was no justification for complacency. He said the "greatest challenge facing our civil society at present" was that young British men, motivated by misplaced idealism, or fanaticism as it might be called, had sought out training in terrorism techniques.

Lord Carlile said he wanted to see a reduction in the use of section 44 anti-terrorism "stop and search powers" and added that there was "little or no evidence" that they have the potential to prevent an act of terrorism compared with ordinary police powers.

Section 44 gives the police the power to declare a geographical area where searches can be carried out which do not have to be founded on "reasonable suspicion". Lord Carlile said that unless the use of the power was clarified the sort of bungle that saw the "inappropriate use" of the powers against the veteran political activist Walter Wolfgang at last year's Labour conference would be repeated.

The report said that last year 266 people were arrested under the 2000 Terrorism Act, 212 of them after the July bombings in London. Thirty-five people were charged as a result of the arrests, 27 with offences under anti-terrorist laws.

Lord Carlile said that the powers under section 44 had never been used in Scotland or in some police areas in England and Wales. He said the Scottish approach demonstrated that other powers were perfectly adequate for most purposes.

"I remain sure that section 44 could be used less and expect it to be used less," said Lord Carlile.

"The crucial thing is that police officers on the ground, exercising relatively unfamiliar powers sometimes in circumstances of some stress, should have a greater degree of knowledge of the scope and limitations of those powers. Terrorism-related powers should be used for terrorism-related purposes; otherwise their credibility is severely damaged," he said in his report.

Lord Carlile said the exception was the extensive use of the powers in London, which was understandable because of vulnerable assets and "relevant residential pockets" in almost every borough.

His concern over customs staffing stemmed from his own experience arriving back at Heathrow from south-east Asia in March. "My own attempt to declare some gifts on arrival at Heathrow airport was met with a total absence of any evident customs officers," he said.

He said this kind of customs staffing shortage was no discouragement to terrorists and was a common complaint from police special branch officers. He again highlighted his concerns over the danger of hijacking of piloted executive jets, which are available to hire and are capable of high speed travel.

In response, the home secretary, John Reid, said that fresh guidance on the use of section 44 would be published later this year. This will say that the powers should only be used to search for articles which could be used in connection with terrorism and police officers should be aware of the full range of other stop and search powers available.

"The guidance also makes it expressly clear that they should only be used by those who have been specifically briefed to do so," said Mr Reid.