The government has been accused of bringing shame on Britain over its lack of compassion for victims of Libyan-sponsored IRA terrorism.
Angry relatives blasted the decades-long failure to secure compensation for atrocities carried out with weapons and Semtex supplied by Col Muammar Gaddafi's regime. It came as a damning report by a group of MPs concluded that victims had been let down by successive governments.
The Northern Ireland Affairs Committee highlighted a series of missed opportunities to secure compensation. It urged the next government to take firm action.
Committee chair Laurence Robertson said: "The UK government cannot allow this litany of missed chances to continue.
"There needs to be direct dialogue with the Libyan government, and if the situation there makes this impossible, the government must begin the process of establishing a fund themselves."
Last night relatives of those killed and maimed with Semtex and weapons supplied by Libya accused the government of acting disgracefully.
Susanne Dodd, whose father Stephen was killed in the 1983 Harrods bomb, contrasted its approach with that of the US administration, which previously secured a $1.5bn (£1.16bn) compensation fund for victims of terror attacks blamed on Libya.
"The US government held Gaddafi to account, our government disgraced themselves," she said.
Gaddafi-supplied Semtex was used in bombings including the Harrods department store in 1983, the Enniskillen Poppy Day blast in 1987 and the Warrington attack in 1993. Today's report examines the failure of successive UK governments to pursue compensation from Libya on behalf of victims.
It states: "There is no doubt that the weapons, funding, training, and explosives that Colonel Gaddafi provided to the Provisional IRA over the course of 25 years both extended and exacerbated the Northern Ireland Troubles, and caused enormous human suffering.
"Whilst other countries have sought compensation from the Libyan government for its role in fostering terror, the UK government has not done so, instead leaving the matter for victims themselves to resolve."
The report found:
÷ Almost £9.5 billion of frozen assets in the UK from the Gaddafi regime could provide "leverage" in negotiations on a compensation deal;
÷ The UK government has left it to victims to secure compensation for fostering terror in stark contrast to other countries;
÷ Tony Blair's government failed to resolve the issue on multiple occasions, most notably when Libya was seeking its rapprochement with the West, by placing the compensation issue firmly on the negotiating table;
÷ The exclusion of the UK victims of Gaddafi-sponsored terrorism from the terms of the US-Libya Claims Settlement Agreement 2008 after Mr Blair left office was another missed opportunity to resolve the issue of compensation, given the determination and vigour demonstrated by the governments of France, Germany and the US.
Lawyer Jason McCue from McCue & Partners, which represents many victims of Libyan-sponsored IRA terrorism, said the government's failure to act was shameful.
He said: "Our government's continued failure to acknowledge this and seek reparations for the UK victims is a national shame."