The Home Affairs Select Committee said the singer was owed an apology by the force after it handed over sensitive information about a planned search of his Berkshire home in connection with an alleged child sex offence.
Sir Cliff, who has not been arrested or charged with any offence and denies any wrongdoing, had not been contacted by either South Yorkshire Police or the BBC when officers arrived at his penthouse home in August.
The force’s chief constable told MPs that officers were forced to co-operate with the BBC when its reporter Dan Johnson approached its media office and threatened to publish a story about the investigation.
In its report, the committee said the force should not have tried to “cut a deal” but instead “approached senior BBC executives to explain the damage that such premature disclosure could do to the investigation”.
It added that it was “unfortunate” the force did not contact the Metropolitan Police in London about the original source of the allegation that Sir Cliff sexually abused a teenage boy during a faith rally held by American evangelist Billy Graham in Sheffield in the 1980s.
South Yorkshire Police say Mr Johnson identified the Met’s Operation Yewtree team investigating historic child sex offences as the source of the leak, but the reporter denies this.
Committee chairman Keith Vaz said: “South Yorkshire Police’s handling of this situation was utterly inept.
“The force allowed itself to hand over sensitive information to a journalist and granted him privileged access to the execution of a search warrant. The email exchanges could easily be mistaken for a script from ‘The Bill’.
“The force should have refused to cooperate and explained to senior BBC News executives why the premature broadcasting of a story, which they claimed the journalist threatened, would have prejudiced the investigation.
“No British citizen should have to watch their home being raided by the police live on television. Sir Cliff Richard has suffered enormous and irreparable damage to his reputation and he is owed an apology over the way matters were handled. We are not suprised he wishes to sell his home.
“Police forces should consider carefully how they deal with approaches from journalists on such matters in the future.”
The BBC was also criticised in the report, which said that in response to requests for information, the Corporation had “chosen to hide their reporter behind his superiors, issuing equivocal denials on his behalf. It said: “It seems likely to us, on balance, that Mr Johnson did indeed indicate to South Yorkshire Police that he had detailed knowledge of the investigation, beyond the name of the suspect, and that, whether by act or omission, he gave them the clear impression that his source was Operation Yewtree.”
It said it was “unfortunate” another BBC correspondent had written a piece misleadingly suggesting South Yorkshire Police were actively seeking publicity.
A spokeswoman for South Yorkshire Police said: “Whilst we believe our actions in relation to dealing with the media were within policy and were well intended, they were ultimately flawed and we regret the additional anxiety which was caused to Sir Cliff Richard.
“South Yorkshire Police has changed the way it deals with this type of media enquiry. In high profile cases the force no longer provides privileged briefings to reporters, nor does it confirm information which media sources seek to verify.
“We are fully cooperating with the Metropolitan Police investigation regarding the original source of information.”
A BBC spokesman said: “The committee chairman has already said that the BBC acted ‘perfectly properly’ in handling this story, and we’re pleased today’s report confirms this.”