A draft report by 16 US intelligence agencies says Afghanistan is on a "downward spiral" and casts doubt on the ability of the corruption-ridden Afghan government to deal with the growing Taliban insurgency.

A draft report by 16 US intelligence agencies says Afghanistan is on a "downward spiral" and casts doubt on the ability of the corruption-ridden Afghan government to deal with the growing Taliban insurgency.

The report, due to be presented to the new US president after next month's elections, follows a statement by the outgoing senior British commander in the country, Brigadier Mark Carleton-Smith, that the war cannot be won.

It also comes on the heels of a leaked diplomatic assessment by Sir Sherard Cowper-Coles, which predicted that the Nato military mission was doomed to failure and that the Kabul regime had "lost all trust" among the population.

General David McKiernan, the US officer in overall charge of the counter-insurgency campaign, said last week: "In large parts of Afghanistan, we don't see progress. We're into a very tough fight."

The bleak US National Intelligence Report cites gains in the building of Afghanistan's national army, but also lays out in stark terms the destabilising impact of the booming heroin trade and its role in funding the insurgency.

It also finds that the breakdown in central authority in Afghanistan has been aggravated by rampant corruption within the government of President Hamid Karzai and by an increase in violence by militants launching attacks from safe havens in Pakistan. Some estimates claim illegal narcotics trafficking accounts for 50% of Afghanistan's economy and employs up to one in 12 of its population.

The UN claims that the Taliban receive more than £50m a year from the drug lords as "tax" used to buy weapons and pay volunteers.

The in-depth intelligence assessment on Afghanistan is the first since the Taliban resurgence in 2006. The insurgents have since launched an offensive that has allowed them to seize large swathes of territory.

Despite a doubling of the UK garrison in Helmand to more than 8000 troops, parts of the province remain under insurgent control and attacks are daily occurrences.

US Lieutenant-General Douglas E Lute, the White House's top co-ordinator for Afghanistan policy, has now been ordered to fact-finding mission before the intelligence report is finalised.

The Herald understands that a second, report on Pakistan is being prepared, looking at Islamabad's efforts to curb extremists inside its own borders and the threat to US and Nato troops from Taliban based in its lawless tribal territories.