Nazanin Zaghari-Ratcliffe’s MP has called on the Government to pay a £400 million debt it owes to the Iranian government to secure her release.

Tulip Siddiq told MPs she was becoming “increasingly frustrated” with the Government as they “ignored the elephant in the room” that the debt had become linked to Ms Zaghari-Ratcliffe’s detention in Iran, and needed to be paid to secure her release.

During a packed Westminster Hall debate which saw MPs of all parties vying for space in the room, Ms Siddiq also read out a letter from Ms Zaghari-Ratcliffe’s husband Richard, in which he revealed the Prime Minister passed him “one day” during his 21-day hunger strike outside the Foreign Office.

Hampstead and Kilburn MP Ms Siddiq said: “In six years of dealing with our Government I am getting increasingly frustrated with the fact that when I deal with ministers from Government they ignore the elephant in the room which is the fact that this case is now linked to the £400 million that we as a country owe Iran.”

She added: “We have seen that it is not a coincidence that any time there is movement on the IMS (International Military Services) court hearing, we see some movement on Nazanin’s case. When the IMS court hearing was delayed earlier this year, Nazanin received a call to say ‘Come to court because we need to speak to you’.”

Conservative former minister Sir Iain Duncan-Smith said other countries had managed to secure the release of their citizens from Iran, asking: “How is it the United States, Australia, France and Germany have all successfully now negotiated their citizens arbitrarily detained in Iran and yet we have made no progress?”

Liberal Democrat Foreign affairs spokesperson Layla Moran said the UK should “call the bluff” of the Iranians, adding: “If the Iranian Government said the debt removes the barrier and then if they still do not release these hostages we show the Iranian Government for the wicked regime it is. I do not see the downside.”

Foreign Office minister James Cleverly told MPs that the Government shared the frustration they felt about the detention of Ms Zaghari-Ratcliffe and other British nationals in Iran.

He added: “A number of members have raised the issue of the International Military Services debt. As I have said to the House of a number of occasions the UK Government recognises we have a duty legally to repay this debt and we continue to explore all legal options to resolve this 40-year-old case.

“But we have always been clear that we do not accept British dual nationals being used as diplomatic leverage.”

Concluding the debate, Ms Siddiq read out a letter from Richard Ratcliffe, which said: “Today marks day 2,054 of Nazanin’s detention. We are approaching our sixth Christmas apart. A little girl has been without her mother for five and a half years now. It did not have to be like this.”

The letter added: “The Prime Minister did not visit me on hunger strike, though he did pass me one day without coming over. His Government continues to put British citizens in harm’s way, Nazanin’s story shames this country.”

The link between the £400 million debt to Iran and Ms Zaghari-Ratcliffe’s detention has not been officially recognised.

MPs were reportedly expecting to be told not to mention the debt during the debate, for fear it could jeopardise an ongoing court case between the UK Government’s arms trading subsidiary International Military Services, and the Iranian defence ministry.

However, at the beginning of the debate, chairman Sir Charles Walker waived rules usually in place to allow discussion of the issue.