A former government defence minister has called on MPs of all parties to overturn the decision of an unelected Cabinet Office advisory group to forbid 35,000 ageing British veterans from wearing a medal awarded to them by a grateful Malaysian government.

Don Touhig, part of Labour's defence team until last year, claims the refusal is a direct insult to the UK's only Muslim ally willing to honour publicly the bravery of British servicemen and women.

The old soldiers, including 5000 Scots, have been denied the right to wear the Pingat Jasa Malaysia (PJM) they won fighting Communist guerrillas in a vicious jungle war 50 years ago because the honours and decorations (H&D) committee claims it contravenes their protocol rules.

Mr Touhig insists the final say should lie with parliament rather than with faceless and unaccountable appointees, and describes their ruling as both "insulting" and "utter nonsense".

Despite a 1968 edict by the Queen that orders, decorations and medals conferred on UK citizens by Commonwealth countries could be worn "without restriction", the Cabinet Office's seven-member H&D committee has spent much of the past two years obstructing the process.

The committee finally ruled in 2006 that eligible veterans, most now in their 70s, could receive the PJM medals, but not wear them publicly. It cited regulations that stipulate no medals being worn for incidents longer than five years in the past and no foreign awards where a British decoration was already available.

Yet last year the government granted permission for medals for the 1956 Suez campaign and allowed Russian medals to be pinned on British survivors of the 1940s Murmansk convoys.

Mr Touhig said: "Malaysia is a predominantly Muslim country. I know of no other Muslim country that today wants to honour British servicemen and women. What message does this decision send out to a friendly Muslim nation when the British establishment is throwing this generous gesture back in its face?"

Andrew Nicoll, one of the leading Scottish campaigners, said: "This medal was earned with the blood of young British soldiers.

The committee is treating their memory and the generosity of the Malaysians with contempt."

The Malayan "emergency" between 1957 and 1966 was never raised to the status of a war because that would have rendered void insurance on British-owned rubber plantations and railways, both insurgent economic targets. A total of 519 British troops, including 95 Scots, were killed in the conflict.