Jack Straw has told MPs that the "path is clear to a free and democratic Iraq".

The foreign secretary used a Commons statement to update the House on the latest moves to transfer sovereignty to an interim Iraqi government.

Straw confirmed that talks are continuing at the United Nations amid hopes that a new security council resolution on Iraq could be agreed shortly.

A new US and UK draft resolution was expected to be tabled in New York on Monday night and Straw said the discussions are being held in a "constructive atmosphere".

He hoped they would be "brought to a conclusion very soon".

Later on Monday, UN special envoy Lakhdar Brahimi was expected to address the security council on the handover process.

Straw confirmed that agreement had been reached on the latest date for the mandate of the multinational force to run out.

The post-handover security operation will cease by December 31 next year or earlier, he said.

Paying tribute to Brahimi and US ambassador Paul Bremer's work, Straw said the political obstacles to the transfer had been removed with the announcement of the new Iraqi Cabinet and the growing security council consensus.

"There will be some difficult times ahead," he told MPs.

"But the path to a free and democratic Iraq is now clear."

Security

The foreign secretary said that the "biggest challenge...is to build security".

"The Iraqi government is resolved to deal with it," he said.

"And we are resolved to help them to do so."

The statement was well received in the House, with Liberal Democrat spokesman Menzies Campbell saying "it would be ungenerous not to acknowledge that in recent days there has been real progress".

Former Labour foreign secretary Robin Cook added that "many of us in this chamber would have welcomed this central involvement of the UN from the start".

Shadow foreign secretary Michael Ancram said crucial questions remained unanswered on the control of peacekeeping troops post handover and the powers of the new administration.