Combat identification is the way in which servicemen and women distinguish friend from foe on the battlefield, as well as civilian non-combatants.
The MoD says there have been six friendly-fire deaths, also known as fratricide, among British troops in Iraq since the US-led invasion in 2003, with failures in equipment, communication and training the given reasons in each instance.
But the department itself insists it continues to place a "high priority" on improving combat identification.
"The focus is on increasing military effectiveness so that operations are conducted successfully and rapidly with the minimum number of casualties overall, including those due to friendly fire," a spokesperson said.
MPs say in the Pac report that because future military operations will increasingly be "conducted in coalition with allies"; the issue of combat identification has become more complex.
They criticise the delays to the army's battlefield target identification project, which have been caused by difficulties encountered harmonising it with the US army.
Also coming under attack is the amount of time that the MoD takes in reporting friendly-fire deaths.
"Friendly-fire deaths during the 2003 Iraq war have shown just how important it is to ensure that the firepower of our forces on the battlefield is directed at the enemy – and not at our own servicemen and women or at civilians," Pac chairman Edward Leigh said today.
"But progress by the MoD has been poor."
Mr Leigh claims that the department "seems no further forward on cooperating with allies on developing a common battlefield target identification system".
And he added he was "amazed" that the senior civil servant responsible for combat identification had no direct control over budget or staff at the MoD.
"Our forces are increasingly facing the rigours of real combat, alongside the forces of allied nations, and they cannot wait year after year for the promised solutions to combat identification, only to find that they are as distant as ever," Mr Leigh concluded.
Shadow defence secretary Liam Fox says the MoD's handling of combat identification is "unacceptable".
"Our service personnel should have the protection they need and not have to worry about this preventable threat," Mr Fox said.
"As we have seen in Iraq, the lack of an ability to identify friend from foe has cost lives. There is an urgent need for the MoD needs to redouble its efforts."
Nick Harvey, Liberal Democrats' defence spokesman, commented: "Increasingly our forces find themselves taking part in joint operations with other countries. This should put the need to tackle the problem of friendly fire at the top of the agenda; instead vital improvements have been left on the shelf at Whitehall.
"If the MoD has a 'friendly fire' supremo then that person ought to have the authority needed to do the job. We ask our troops to put their lives on the line, they need to know that the officials back home are doing all they can to protect them."
But Adam Ingram, minister for the armed forces, said: "Incidents of friendly fire are tragic, and are generally caused by a number of complex, inter-related factors – not by the lack of a particular piece of equipment.
"The result will be that combat identification is also improved and the risk of friendly fire is minimised," he continued.
"The MoD will continue to strive to find the best solutions to deal with this important issue."
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