Four-and-a-half years after Baha Mousa, a 26-year-old hotel receptionist, died while detained by soldiers from the 1st Battalion the Queen's Lancashire Regiment, Defence Secretary Des Browne said holding an inquiry was "the right thing to do".

The head of the Army, General Sir Richard Dannatt, said the inquiry – to be headed by a senior judge – needed to establish whether Mr Mousa's death was the result of the "misguided" actions of a few individuals or a wider "systemic" failure.

However, Ministers indicated they would resist demands by lawyers for the family that the inquiry should also look at other cases involving alleged mistreatment by British soldiers.

"If we draw (the terms of reference) too widely, then we don't give sufficient weight to the incident itself," Armed Forces Minister Bob Ainsworth told reporters.

"We want the inquiry to focus upon the causes and the reasons for the death of Mr Baha Mousa."

Solicitor Phil Shiner, representing Mr Mousa's family and other Iraqis who were mistreated, said they wanted to see a single inquiry into British detention policy in Iraq.

"It will not be sufficient if the inquiry has a narrow remit and does not look at all the cases and issues," he said.

"The public, as well as Parliament, must be given the opportunity of fully understanding what went wrong in our detention policy in Iraq and what are the lessons to be learned for the future."

In particular, he said, the inquiry should be able to investigate an incident at the Abu Naji facility in May 2004 in which 20 Iraqis were allegedly executed and nine survivors tortured.

Gen Dannatt insisted the Army had nothing to hide and would co-operate fully with the inquiry.

"We need to be absolutely confident that this was simply the misguided and disgraceful actions of certain individuals and that there was nothing systemic that led to these events taking place," he said.

"We need to get further under the skin of this."

In particular, he said, it needed to look at how interrogation techniques banned in 1972 – hooding, stressing, food and water deprivation, sleep deprivation and noise – came back into use in 2003.

The Government has already admitted breaching the human rights of Mr Mousa and eight other Iraqi men who have brought a civil case in the British courts.

The announcements opened the door to unlimited compensation payouts.

Last year seven members of the Queen's Lancashire Regiment, which is now the Duke of Lancaster's Regiment, faced the most expensive court martial in British history over the death of Mr Mousa, but all were eventually acquitted.

One soldier, Cpl Donald Payne, 35, became the first British serviceman to admit a war crime, that of treating Iraqi prisoners inhumanely. He was jailed for a year.

While Gen Dannatt said the criminal investigative process had now been exhausted in this case, he said that it was still possible that individuals could face disciplinary action as a result of what the inquiry found.