An Iraqi teenager who was shot accidentally by a British soldier is set to receive £2 million compensation, at least seven times as much as British service personnel would receive if injured on duty.

The injured teenager suffered severe spinal injuries after a soldier he had befriended dropped his gun, discharging the weapon in the process.

The Iraqi, who was 13 at the time of the incident in September 2003, had apparently become friendly with British guards at a gate in southern Iraq. After the incident he moved to Britain and started a legal action against the British Government.

The settlement, which is subject to a further High Court hearing, is the highest payout to anyone injured in the Iraq conflict. It is more than the total compensation paid out for accidental injury and death to all Iraqis since the start of the British presence there in 2003. It is also more than the maximum lump sum payment of £285,000 given to injured British troops under the Armed Forces Compensation Scheme.

The Government has been criticised in recent months for not increasing the size of the award and for its failure to provide severely-injured troops with the maximum payout.

Opposition MPs gave a warning that the payout to the Iraqi youth could set a precedent and open the way for more large compensation claims by Iraqis against the British Government.

The Ministry of Defence insisted that the case was a one-off. A spokesman said: “It is not a precedent, it is an exceptional case. It is not expected that there are any other cases of such severity.” The spokesman said that the payout reflected the costs of caring for the teenager, who cannot be named for legal reasons, for the rest of his life and that the MoD had accepted that the shot that injured him was a “negligent discharge”.

Vince Cable, the Liberal Democrat Treasury spokesman, said: “The Government claims that this is a completely unique case but it is very difficult to believe that that is the case. If Iraqis were able to get access to British courts they would clearly be entitled to much higher levels of compensation, based on this precedent.”

Channel 4 News, which obtained details of the planned payout, said that there were at least 21 other cases of serious injury that have led to compensation payments in Iraq.

But it is the contrast between the award for the Iraqi teenager and the compensation that British troops are entitled to that will provoke anger.

The Government was criticised last month after Mark Ormrod, a 24-year-old Royal Marine, who lost both legs and his right arm after stepping on a landmine in Afghanistan, was offered only £214,000 in compensation.

The Government introduced changes to the system last year after the treatment of Paratrooper Ben Parkinson who, despite being described by doctors as the most severely wounded British soldier ever to survive, was offered only £152,150. The Lance Bombardier, 23, was left with 37 injuries including severe brain damage, speech loss and the amputation of both legs. He was eventually promised the maximum £285,000.

The Government announced reforms to the system in January but retained the £285,000 cap.

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