All counter-terrorism laws should have a maximum five-year lifespan, a committee of MPs and peers has said.
The joint committee on human rights said legislation like the government's controversial Terrorism Bill should only be renewed by parliament - not by ministerial order - and should be subject to parliamentary review.
The MPs and peers also recommended setting up an independent body to monitor security services MI5 and MI6.
The committee's report, published on Tuesday, said a new mechanism was also needed to monitor "the government's claims based on intelligence information" - although it does not mention the dossier on Iraq's weapons of mass destruction.
The committee took the unusual step of publishing a letter in which MI5 director general Dame Eliza Manningham-Butler refused to appear and give evidence.
MPs and peers wanted her to answer questions on subjects including whether the security services used information from foreign informants obtained by torture, and whether the UK was involved in the practice of 'extraordinary rendition'.
The report also concluded the ban on using evidence from telephone taps in court should be scrapped to make it easier to prosecute suspected terrorists.
It said the government should "urgently consider ways of enhancing incentives to give evidence for the prosecution", raising the prospect of 'super-grasses' appearing in terrorism trials.
And the report said: "The committee is concerned by the finding of the home affairs committee, in its recent report on terrorism detention powers, that the purpose of pre-charge detention in Terrorism Act cases is used mainly for the purposes of prevention and disruption rather than for the purposes of investigation."
The committee recommended giving compensation to suspects held by the police but not charged, and providing counselling to all those detained longer than 14 days.
Shadow home secretary David Davis said: "We would welcome the removal of the ban on the use of intercept evidence and have been calling for this for some time.
"Subject to the appropriate safeguarding of sources, methods and the rights of defendants, it would also be a very good way of bringing terror suspects into the justice system by allowing them to be charged under existing terror laws.
"This would reduce the risk of recruiting more terrorists by locking up suspects in an arbitrary fashion, such as through the use of control orders.
"We would broadly support the use of incentives to give evidence for the prosecution as long as the process was strictly controlled so that the innocent do not end up pleading guilty and we do no end up with untrustworthy evidence."
Dr Evan Harris, Liberal Democrat member of the committee, said: "If the government, police and prosecution authorities invested as much time in alternative approaches to getting effective prosecutions as they did to seeking to extend pre-charge detention and house arrest of suspects who they do not bring to trial, then they would find they did not need these more dubious approaches at all."