Lady Thatcher, who recently enjoyed tea with the former dictator in front of a barrage of television cameras, condemned the decision by Home Secretary Jack Straw to let the proceedings continue.

"The home secretary's decision that the extradition of Senator Pinochet to Spain can proceed is a vindictive political act," she said.

"His consideration of the arguments seems to have been superficial and inadequate.

"This is not the decision of a fair-minded man. He has placed his ambitions above his duties and so demeaned his office."

Lady Thatcher's views were backed by Shadow Home Secretary Sir Norman Fowler, who said the home secretary had missed an opportunity to end this "sorry affair".

He said: "As a result of the home secretary's decision, we now face month after month of protracted legal argument."

The matter should be left for Chile to decide, he said.

But Robin Corbett, a member of the Home Affairs Select Committee, said Mr Straw had done the right thing.

"Jack Straw had a responsibility to take, in a sense, a clinical judgement on this. It's for others to take other factors into account," he said.

"I'm of a strong view that neither age nor time should automatically provide a pardon for those accused of human rights abuses."

Former Conservative Home Secretary Kenneth Clarke also criticised Mr Straw's decision as being bad for the UK's political relations with Chile.

He said: "I think Jack should have exercised his discretion in the national interests on the basis this is bad for the political settlement in Chile, it is bad for our relations with the friendly democratic government there.

Kenneth Clarke: "A mistake"

"The best and most sensible solution for a country which is settling down, is stable, is a friend of this country, would be to allow Pinochet to go back to his own country."

Mr Straw's decision follows last month's decision by the Law Lords to cut the number of charges General Pinochet faces to those from his last two years in power.

Mr Straw reconsidered his original decision to issue the "Authority to Proceed" after an unprecedented second hearing of the case.

In December, Mr Straw gave the go-ahead for extradition proceedings against the general following a House of Lords ruling that he was not immune from prosecution.

But that ruling was later set aside when it emerged that one of the Law Lords, Lord Hoffmann, had not declared connections with human rights group Amnesty International.

Labour MP Ann Clwyd said: "I'm absolutely delighted by the decision, its very good news for the families of the disappeared and the tortured and the murdered.

"We have campaigned in the parliamentary human rights group in the months since he has been here and we think there's very serious charges against him of torture, disappearances and murder.

"Those should be answered. This decision gives a very clear message to anyone who is may be carrying out these crimes at the moment, like Slobodan Milosevic and Saddam Hussein - there is no hiding place."

She said she was still receiving evidence from people around the world about practices under the general's regime.

"I hope the extradition happens as quickly as possible," she added.

A spokeswoman for the Scottish National Party also welcomed the decision.