Foreign Office officials were not consulted about and did not authorise the payment of a ransom to secure the release of five-year-old Sahil Saeed, who was kidnapped in Pakistan and freed earlier this month, the Government said.
A ransom of £110,000 was reportedly paid by the Oldham boy's family to secure his release after a 13-day ordeal.
Foreign Office minister Baroness Kinnock said in a written reply that the Government's policy of "not making or facilitating substantive concessions to hostage-takers, including the payment of ransoms, is long standing and clear".
"We believe that making such concessions rewards hostage-taking and encourages future kidnaps," she told Liberal Democrat Lord Dykes.
"Foreign and Commonwealth Office officials were neither consulted about nor authorised payment of a ransom to secure the release of Sahil Saeed in Pakistan."
She said officials would continue to offer "consular assistance" to the families of those taken by kidnappers.
Several arrests have been made in Spain and Pakistan in relation to the kidnapping of Sahil.
