that the decision not to speak to Hamas in 2007 following the Mecca agreement has been counterproductive. We further conclude that a national unity Government could and should have been established much earlier than the spring of 2007. We recommend that, in its response to this Report, the Government set out when it began to actively support the establishment of a national unity Government in the Occupied Palestinian Territories.This is exactly the wrong solution. There is no possibility for a successful unity government between Hamas and Fatah, and given the civil war, it's hard to imagine why the committee feels it would have been better to create a unity government earlier (to be fair, the committee also wants the UK to end the political and economic isolation of Hamas, so it may be that it's thinking is that if economic conditions hadn't been so dire, things would have worked out differently).
As I have written on numerous occasions, the problem in the Palestinian territories is that neither side, nor the government in a general sense, possesses a monopoly of violence, which enables each side to undermine the other. There are only two ways to deal with this situation (assuming one wants to eventually reunite the West Bank with Gaza in an independent Palestinian homeland): support Fatah against Hamas, or support Hamas against Fatah. So long as the two groups maintain military/police power outside of the aegis of the government, there will no lasting peace and no political stability. Creating a unity government merely papers over this situation, but only until a divisive problem arises that splits the two parties. I don't have any intrinsic problems with Hamas ruling (although I would prefer it be Fatah); what is critical is that whichever group controls the government do so completely and totally.