Tony Blair last night admitted that allowing the Iran detainees to sell their stories had not been a "good idea", as he tried to quell a barrage of criticism.
The Prime Minister insisted everyone involved in the controversial decision had acted "completely in good faith and honourably" but, with "hindsight", they had got it wrong.
During a visit to Wales, Mr Blair said: "With hindsight, was it a good idea? No. Do I believe it will happen again? No."
The admission came after Defence Secretary Des Browne took "full responsibility" for allowing the 15 military personnel to cash in on their ordeal - although he stressed the Navy had made the choice.
Mr Blair insisted he had not known about the decision until after it was taken and said it was "time to move on".
"The Navy was trying to deal with a wholly exceptional situation, where the families were being pursued by the media to sell their stories.
"The Navy took the view it was better to manage the situation than let it happen.
"Now, with hindsight, was that a good idea? No. But precisely because people would then misrepresent that as somehow the Navy encouraging people to sell their stories, which they were not at all."
Tory leader David Cameron has demanded details of who took the "calamitous" decision and when - warning it had caused "great damage to our armed forces".
Michael Portillo, former Defence Secretary, launched a scathing attack on his successor at the Ministry of Defence, claiming the current controversy was "the biggest calamity to befall the Royal Navy since the Falklands".
The Liberal Democrats also insisted answers were needed to key questions about the "fiasco" - with both parties also demanding a probe into the original capture of the naval personnel.
Many people believe the handling of the aftermath of the crisis has gifted Iran a major propaganda victory.
Earlier, in his first interview since the controversy over stories erupted, Mr Browne conceded he perhaps should have blocked the Navy from giving the go-ahead in the first place. He slapped a ban on further sales on Monday.
Mr Browne denied trying to pass the buck on to military chiefs, admitting: "Ultimately, the buck stops here."
The government has faced a welter of criticism since allowing some personnel held for 13 days by Tehran after a routine patrol to sell their stories.
Leading Seaman Faye Turney sold her story to The Sun and the account of the youngest captive, Arthur Batchelor, appeared in the Daily Mirror, while others gave the media accounts without payment. But Mr Browne then halted any further sales pending a review of procedures.
Last night, Glasgow anti-war campaigner Rose Gentle, whose 19-year-old son Gordon was killed by a roadside bomb in Basra in June 2004, said: "I'm a bit disgusted. This should have been stopped. Des Browne should have put a stop to this. He's been responsible for it."
Also yesterday, the Tories sought to make political capital out of the naval stories row.
In Fife, Mr Cameron portrayed his party as defenders of the armed forces.
He said what forces families needed was "a government that understands the military and understands the importance of maintaining respect and dignity, and I don't think we've got that in our government today".
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