Questions are being asked after a £31 million public inquiry found that allegations of murder and torture against the British military it was set up to investigate were "completely baseless".

The long-running Al-Sweady inquiry concluded in its final report that allegations of war crimes following the Battle of Danny Boy on May 14 2004 in southern Iraq were based on "deliberate lies, reckless speculation and ingrained hostility".

Although it found instances of mistreatment of detainees which breached the Geneva convention, the report praised British forces for responding to a deadly ambush by insurgents with "exemplary courage, resolution and professionalism".

Defence Secretary Michael Fallon was joined by former Cabinet ministers in heavily criticising lawyers acting for Iraqi claimants at the inquiry.

And he was urged to draw up measures to stop "unscrupulous" lawyers financially benefiting at public expense from triggering investigations.

Two former service chiefs also hit out at the inquiry, saying that it had placed soldiers working in difficult conditions under "outrageous" stress.

Mr Fallon said the report had shown beyond doubt that all of the most serious allegations were "wholly without foundation".

He told MPs that it "puts to rest once and for all these shocking and, as we now know, completely baseless allegations".

And he said the Ministry of Defence (MoD) would try to recoup public money spent on a judicial review of the incident, but was unable to claim back any of the cost of the public inquiry.

Labour former defence secretary Bob Ainsworth, who set up the inquiry in 2009, rounded on Public Interest Lawyers, who represented Iraqi claimants, suggesting that Britain's legal systems had been "systematically abused".

Speaking in the House of Lords, Admiral Lord West of Spithead, the former First Sea Lord, said it appeared there was more interest in the human rights of "people who set out to kill us" than of British soldiers.

And General Lord Dannatt, the former Chief of the General Staff, said there was an "unhealthy predisposition" to take seriously claims made against British armed forces

Lawyers representing the alleged victims' families had already admitted during the public inquiry that there was no evidence of unlawful killing.

But delivering his final report after a five-year process which began in November 2009, inquiry chairman Sir Thayne Forbes said that the most serious allegations were "wholly and entirely without merit or justification".

He wrote: "The work of this inquiry has established beyond doubt that all the most serious allegations, made against the British soldiers involved in the Battle of Danny Boy and its aftermath and which have been hanging over those soldiers for the last 10 years, have been found to be wholly without foundation and entirely the product of deliberate lies, reckless speculation and ingrained hostility."

However, the retired High Court judge did find that there had been instances of ill-treatment during "tactical questioning" of the detainees at Camp Abu Naji (CAN), near Majar-al-Kabir in southern Iraq, on the night of May 14/15.

These included depriving the prisoners of sight, food and sleep, and using threatening interrogation techniques contrary to the Geneva Convention.

It amounted to ill-treatment and fell below the high standard to be expected of the British Army, Sir Thayne said.

The former judge set out nine separate recommendations based on his findings.

He said it was crucial that improvements should be made to the collection, storage and ability to search documents and records.

Other recommendations included the implementation of a "shooting incident policy" and the need for better arrest records for detainees in theatres of war.

Responding to criticisms following the report, lawyers who represented Iraqi claimants said the inquiry had been "legally necessary, morally justified and politically required".

John Dickinson, lead solicitor with Public Interest Lawyers, denied that the firm had anything to be ashamed of or that it had suffered a defeat.

He said: "It would be a defeat if we were seeking to claim compensation, if we had been seeking to bring home a criminal conviction.

"The whole purpose of an inquiry is to inquire and we are content with the decisions and the conclusions reached."

Mr Dickinson said the firm had made £900,000 from the inquiry through five years' work by three people.

Meanwhile, the solicitors' watchdog said it is still investigating claims that a lawyer with London-based firm Leigh Day destroyed a key document at the centre of the Al-Sweady inquiry.

The document, an English translation of an Arabic record, suggested that some of the Iraqi claimants were members of the Mahdi Army.

David Middleton, executive director at the Solicitors Regulation Authority (SRA), said: "We continue to look into the matter.

"We take all issues brought to us seriously and need to investigate thoroughly before reaching any decisions.

"We will therefore be studying the inquiry report to see if there is anything further for us to look at."

Leigh Day said it had not been aware of the significance of the document and that it had remained in its files until being handed over to the inquiry in September 2013.

"On this occasion we did not get things right. We have apologised to the inquiry for not realising the significance of this document sooner," a spokesman said.

He added that the firm was working with the SRA "to prevent any similar mistakes in the future".

The inquiry was named after Hamid Al-Sweady, a 19-year-old student whose father Mizal Karim Al-Sweady claimed he was murdered after being detained.

It was ordered by then-defence secretary Mr Ainsworth in November 2009 amid concerns from High Court judges that the MoD had not properly investigated the events of May 2004.