* Britain accepts scheme had significant systemic failures
* Letters are no "get out of jail card" - minister
* Legacy of violence "poisoning political debate" (Adds details from report, reaction)
By William James and Ian Graham
LONDON/BELFAST, July 17 (Reuters) - A British scheme to inform Irish nationalist militants they were no longer wanted by police was flawed, the government said on Thursday, apologising for a policy that allowed a suspected bomber to walk free earlier this year.
Suspected members of the Irish Republican Army (IRA) received letters telling them they were no longer wanted, as part of a 1998 peace deal that largely ended three decades of violence over Britain's rule of Northern Ireland.
Many victims of IRA attacks were unaware the scheme existed until February when John Downey, an Irishman charged with murder for a 1982 car bombing in London's Hyde Park, was released by a judge who said the letter, which mistakenly told him he was no longer being sought for prosecution, meant his trial would be an abuse of executive power.
That provoked anger in Northern Ireland, particularly among pro-British loyalists and First Minister Peter Robinson forced London to launch an official inquiry, threatening to resign as leader of the province's government if it did not.
Prime Minister David Cameron agreed to the inquiry after saying the government had made a "dreadful mistake" by sending the letter. Downey pleaded not guilty.
Commenting on the inquiry's findings which were released on Thursday, Northern Ireland Secretary Theresa Villiers told parliament the government would to try to remove barriers to future prosecutions and that recipients of the letters should not think they had a "get out of jail card".
"They will not protect you from arrest or prosecution and should the police succeed in gathering sufficient evidence, you will be subject to due process of law," she said, telling parliament the government accepted the report's finding that the scheme, now ended, suffered "significant systemic failures".
"The government is profoundly sorry for the hurt this case has caused to all victims of terrorism," Villiers said
In addition to Downey, Villiers said two other suspects had wrongly been sent such letters.
The head of Northern Ireland's police force apologised for wrongly informing the authorities that Downey was not wanted and for its failure to secure justice for the families of the Hyde Park bombing, in which four soldiers were killed.
The controversy over the so-called 'On The Runs' scheme highlighted the tension that still exists between Irish Catholic nationalists and mostly Protestant loyalists over the conflict in which more than 3,600 people were killed.
In May, police detained nationalist leader Gerry Adams for four days for questioning over a 1972 murder. He was released without charge, but the incident increased fears of a worsening in cross-community relations.
"The legacy of Northern Ireland's past is a recurrent issue, has the capacity to poison the political debate and to provide a block on genuine reconciliation," Villiers said. (Additional reporting by Padraic Halpin in Dublin; Editing by Robin Pomeroy)
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