Intelligence officers and police with knowledge of the Kincora child abuse scandal in Northern Ireland will not be prosecuted under the Official Secrets Act for giving evidence to the historical abuse inquiry, the attorney general for England and Wales has said.

Two former army intelligence officers, Colin Wallace and Brian Gemmel, have claimed they reported abuse at the east Belfast home, which was controlled by a prominent Orangeman and state agent, but were ignored by the authorities. They allege that instead of moving against paedophiles running the home, the security forces blackmailed the Orangeman William McGrath and others to spy on other hardline Ulster loyalists from the 1970s onwards.

In a letter to the inquiry chairman, the attorney general Jeremy Wright QC advises: “No evidence a person may give before the inquiry will be used in evidence against that person in any criminal proceedings or relied upon for the purpose of deciding whether to bring such proceedings against that person … For the avoidance of doubt, I can confirm that the undertakings cover any allegation of an offence arising under the Official Secrets Act.”

Amnesty International welcomed the move. Patrick Corrigan, Amnesty’s Northern Ireland programme director, said: “The allegations surrounding Kincora could scarcely be more disturbing – that MI5 turned a blind eye to child abuse and actively blocked a police investigation, instead using the paedophile ring for its own intelligence-gathering purposes.

“These assurances from government should pave the way for the former officers – otherwise bound by the Official Secrets Act – to finally speak freely to an official inquiry.”

The historical abuse inquiry, based at Banbridge courthouse in Co Down, has a remit to investigate allegations of child abuse in 13 care homes and orphanages across Northern Ireland, including Kincora. The hearings will continue until the end of the year, and the inquiry could cost up to £19m.

Victims of physical and sexual abuse at Kincora initially demanded that their cases should be part of a wider Westminster inquiry into alleged establishment paedophile rings. However, the home secretary resisted their demands and instead the Banbridge-based team will investigate the scandal. The Kincora element of the inquiry is it not expected to be heard until the latter stages.

One of the Kincora victims ,Clint Massey, has alleged that as a child in 1973 he tried to inform the Royal Ulster Constabulary that boys were being mistreated in the home, but he was ignored. RUC Special Branch have also been accused, alongside MI5, of using information about the abusers to recruit them as informers.