Yeah, you put in words what I was thinking for a while now. It's obvious that these problems aren't specific to the NSA or GCHQ. Rather they're due to a cold war mindset that too many senior civil servants and politicians seem unable to break out.
GCHQ has been hacking Belgacom to spy on the EU in Brussels. WTF? Why?! If they want to know what's going down in the EU then they can just ..... go ask. I mean the UK contributes its fair share of money to the EU, so what possible benefit is there to treating it as if it was the KGB?
These agencies need to be stripped down, badly, and the money saved reinvested into other things. The staff that are left can be given a purely defensive mandate (w.r.t internet stuff at least). But I don't think it will happen whilst the current lot are in charge. They seem to like the power too much. And maybe they are also trapped in a cold war mindset. Perhaps it will take my generation, the first post cold-war generation to enter politics before these problems get really fixed.
BTW the UK announced today that it was renaming the national police squad again. SOCA no longer, now it's the National Crime Agency, formed from merging several agencies together ...... and slashing the budget by 30%. So it is spending money to record all internet traffic, every last TCP ACK, but the actual police who deal with practical problems on British streets, like gang warfare, they're having their budget murdered. 999 response times have doubled since austerity began. It's obvious that a working national police force and working emergency services save more lives than GCHQ hacking oil firms and telcos.