And the FAC backed a recent report by fellow British MPs on the Public Accounts Committee's which recommended that the FCO should explore how Overseas Territories might make better use of UK expertise and that it should also explore whether those Territories with Public Accounts Committees could make more use of ex-officio members.

The FAC also wants the Foreign and Commonwealth office to encourage Bermuda to continue to improve financial regulation, in particular in money laundering investigations.

The report noted that Bermuda is the only Overseas Territory whose government favours independence but that opinion polls still showed a majority against splitting from Britain.

The MPs said they were pleased with hints by UK Overseas Territories Minister Meg Munn that an election of a party by a tiny majority in low turnout election would not be acceptable as a way of taking the country to independence.

Months in the making the inquiry by the FAC is the first in ten years on the OTs and saw three MPs visit Bermuda in March to gather evidence.

In a press release accompanying the release of the findings Committee chairman, Mike Gapes MP, said: "This is a wide-ranging report considering the FCO's discharge of its responsibilities with regard to the UK's 14 Overseas Territories and making recommendations across these Territories.

"We considered the FCO's management of the risks and contingent liabilities to which Overseas Territories expose the UK.

"We recommend that the FCO should encourage Bermuda, the British Virgin Islands, the Cayman Islands and Gibraltar to continue to make progress in improving financial regulation, in particular in arrangements for investigating money laundering.

"Overall, we have concluded that, in some cases, the FCO's approach has been too hands-off. The FCO must take its oversight responsibilities for the Overseas Territories more seriously."

Last night, Acting Governor Mark Capes said: "'This report is a significant document that identifies and discusses a wide range of issues in terms of how the Foreign and Commonwealth Office (FCO) manages its responsibilities in relation to the Overseas Territories.

"The FCO will carefully consider each recommendation in the report and prepare a formal response within two months. Meanwhile, I expect that within Bermuda and the other Overseas Territories the report may stimulate some lively debate which I hope will prove to be constructive."

The report will be sent to the Foreign and Commonwealth which will have 60 days to respond.