CHELTENHAM, England (Reuters) - British spies are developing an offensive cyber capability to fight Islamist militants, hackers, criminals and hostile powers who threaten British interests, finance minister George Osborne said on Tuesday (Nov 17).

"We need to establish deterrents in cyber space. We need to not just defend ourselves against attacks but rather to dissuade people and states from targetting us in the first place," Mr Osborne said.

"We are building our own offensive cyber capability," he added in a speech at the GCHQ eavesdropping agency in Cheltenham, southern England.