Last updated at 11:27 AM on 31st August 2009
Jack Straw last night admitted surrendering to Libyan demands for the Lockerbie bomber to be included in a prisoner transfer deal.
Families of the 270 who died in Britain's worst terrorist atrocity expressed outrage after the Justice Secretary said 'wider issues' had been at stake.
Mr Straw confirmed he initially agreed Abdelbaset Al Megrahi should be omitted from a prisoner transfer agreement but then reversed course.
FOUR DAYS AGO: Megrahi on his sick bed at home in Tripoli, Libya, where his family say he is getting better every day
Senior MPs said mounting questions about links between commercial deals with Libya worth up to £15billion and the release of the terrorist could be answered only by a full Parliamentary inquiry.
Ministers have dismissed suggestions of a 'terrorist-for-trade' agreement as an offensive slur.
Mr Straw angrily denied that a backdoor deal had been struck over Megrahi, who was given a hero's welcome in Libya after being released by the authorities in Scotland earlier this month.
Doubts over just how sick Megrahi is were raised last night after a UK television journalist visited him at home and in hospital in Tripoli. Wearing an oxygen mask and connected to a drip, the bomber appeared much more poorly than four days ago when he was pictured with his family.
YESTERDAY: More like a dying man? Megrahi wearing an oxygen mask and connected to a drip
The Government had 'repeated and repeated' to the Libyan authorities that the Scottish administration would have the final say, Mr Straw said.
In July of that year, he had said he favoured excluding Megrahi from a prisoner transfer deal being negotiated with Libya by stipulating that anyone convicted before a certain date would not be included.
But Mr Straw switched his position - apparently after Libya used an oil exploration deal with BP as a bargaining chip.
A source close to Mr Straw told the Times today: 'It wasn't just Jack who decided this. It was a Government decision. Jack did not act unilaterally.'
On December 19, 2007, he wrote to Mr MacAskill: 'I had previously accepted the importance of the Megrahi issue to Scotland and said I would try to get an exclusion for him on the face of the agreement.
'I have not been able to secure an explicit exclusion. 'The wider negotiations are reaching a critical stage and, in view of the overwhelming interests of the United Kingdom, I have agreed that in this instance the [prisoner transfer agreement] should be in the standard form and not mention any individual.'
Six weeks later, Libya ratified the BP deal.
Mr Straw said yesterday that the 'normalisation of relations with Libya' had been in the UK's interests because they had agreed to the 'dismantling of their nuclear weapons programme'.
He added: 'But was there a deal? A covert, secret deal ever struck with the Libyans to release Megrahi in return for oil? No, there was not and there is no evidence whatsoever because it is untrue.'
He said the Scottish administration had sought a 'carve-out' of Megrahi's case in the prisoner transfer deal, but in the end it became clear that would not be acceptable to the Libyans.
'They said, "If you are after the normalisation of relations, what we want is simply a standard, normal prisoner transfer agreement, not one that carves out in respect of any one prisoner".
'Given that, and yes, there were of course wider issues of relations with Libya, I gave instruction that we should agree a prisoner transfer agreement in standard form.'
Mr Straw insisted the prisoner deal was academic since Megrahi had been released on compassionate grounds because of his terminal prostate cancer.
Channel 4's Jonathan Miller, who visited Megrahi yesterday, was banned by family and doctors from asking him questions.
When he asked the bomber directly whether his release was related to the lucrative UK-Libya oil deal that was signed two years ago, Megrahi shook his head and croaked a refusal to answer.
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