Parliament’s intelligence watchdog has said it was misled by the government when it failed to reveal that a former GCHQ boss had been allowed to resign quietly after it emerged he had helped a paedophile priest to avoid jail.

The intelligence and security committee (ISC) said it had been assured that Robert Hannigan had quit for “family reasons” in 2017, only to discover from a media report two years later that the truth had been covered up with the approval of the then prime minister, Theresa May.

The ISC complained in its annual report that it had been “misled on the issue” and added that when “the head of an intelligence agency steps down unexpectedly … this committee must be fully informed of the circumstances.”

It accused the former national security adviser Mark Sedwill of giving unsatisfactory answers after committee members read about why Hannigan had quit in a report in the Mail on Sunday, which accused May of “presiding over a cover-up”.

“Given the investigative powers with which we trust our intelligence community, it is imperative that they are above all suspicion,” the ISC said.

The cross-party committee, chaired by the Conservative MP Julian Lewis, has oversight of GCHQ and Britain’s other intelligence agencies, MI5 and MI6. It holds its meetings in secret but publishes an unclassified annual review and other reports giving more details of its scrutiny activity.

Hannigan was criticised for appearing in a Channel 4 documentary, The Hunt for Jihadi John, after he had left GCHQ. The ISC complained that in the programme “he provided operational details” as to how the Britain’s intelligence agencies identified the Briton Mohammed Emwazi as the notorious Islamic State killer. Hannigan said in the documentary that Emwazi was identified by “his size, his hands but above all his voice”.

ISC inquiries established that Hannigan’s participation had not been cleared by the government and that the only sanction taken against him was that his successor, Sir Jeremy Fleming, sent him a letter of advice reminding him “to seek approval” before appearing in the media in future.

The cross-party committee said it was surprised “that a previous head of one of those organisations can appear on television and divulge those secrets and yet no substantive action can be taken”, and this sent “entirely the wrong message” to those who may be tempted to breach the secrecy rules in the future.

Hannigan resigned as head of the signals intelligence agency in April 2017 after two and a half years in the job. It was briefed that he was stepping down principally to look after his ill wife and two elderly parents.

It subsequently emerged that the National Crime Agency had discovered that Hannigan provided a character reference in the 2013 trial of Father Edmund Higgins, a Catholic priest who was found guilty of possessing 174 child abuse images. The reference helped the priest avoid jail; instead he received an eight-month suspended sentence.

Hannigan resigned at a time when Higgins was again under police investigation, this time under the name Edmund Black. He was subsequently jailed for 31 months in June 2018 after pleading to guilty to further charges involving child abuse images. The court heard that Higgins would watch and share child abuse videos, including one that involved a baby.

The national security adviser told the ISC that the intelligence watchdog had not been told about the real reason for Hannigan’s departure because the police inquiry was ongoing and the information needed to be held within a restricted group.

“It would not have been appropriate to share information outside this group, including with the ISC, during the investigation,” Sedwill wrote.