SENIOR government officials gave preferential treatment to a miners’ union that is under police investigation over its role in a £7.5 billion compensation scheme, a former minister has told The Times.

Brian Wilson, Energy Minister from 2001 to 2003, said he discovered that Department of Trade and Industry (DTI) officials had signed an agreement over miners’ health claims that was “extremely favourable” to the Union of Democratic Mineworkers (UDM) in 1999. He called on the DTI to publish all correspondence that it had on the contacts and the agreements signed with the UDM. “This whole paper-trail should now be brought into the open,” he said.

Mr Wilson’s intervention came after revelations in The Times yesterday that the fraud squad had launched an inquiry into how senior officials and employees at the UDM had benefited from what has become the world’s largest personal injury compensation scheme.

In response to the article, 18 MPs have signed an early-day motion demanding the suspension of the government deal allowing the UDM to handle compensation claims directly for sick miners.

The compensation schemes, for chronic lung diseases and a crippling hand condition, vibration white finger, started in 1999 when the DTI signed an agreement with 700 legal firms. Their costs would be paid by the DTI for every claim settled.

In the same year, however, DTI officials signed a separate agreement with the UDM that allowed Vendside, its claims-handling company, to handle cases without the involvement of outside solicitors.

While other unions, including the National Union of Mineworkers and Nacods, the pit officials’ union, had to refer their members’ claims to solicitors, the UDM was allowed to settle cases in-house.

Mr Wilson welcomed the police inquiry and called last night for it to be matched by “full transparency” on the part of the DTI.

“I inherited a situation in which an arrangement had been entered into with the UDM which was extremely favourable to that organisation both in absolute terms and also in comparison with the treatment of the NUM,” he said. “I repeatedly questioned this and also rejected advice from officials which would have resulted in the position of the UDM being strengthened still further.

“There are major questions to be answered about how this was translated into policy decisions, particularly at the outset of the schemes, and I would welcome full transparency on the part of the DTI in releasing all relevant documentation.”

John Mann, Labour MP for the Nottinghamshire constituency of Bassetlaw, who tabled the early-day motion, said: “I am absolutely astonished at the labyrinth of companies involved. They are feeding off each other at the expense of sick and dying miners.”

The DTI last night said that it felt unable to respond to Mr Wilson’s criticism “in the light of the police investigation”, with which it said it was fully co-operating. A spokeswoman said that under the terms of the agreement signed with the UDM/Vendside, the DTI was under “a legal obligation to continue to process (UDM) claims”.

The DTI has previously stated that its claims-handling agreements with the UDM/Vendside were signed by DTI officials with the approval of John Battle, the Energy Minister from 1997 to 1999.

The Times can reveal that the UDM agreement was initially kept so secret by the DTI that even members of the English Monitoring Group (EMG) — a body set up to advise ministers on the progress of the compensation schemes — were not told of its existence.

Peter McNestry, of the EMG, said yesterday that the UDM deal came to light only after he and his colleagues noticed a discrepancy. They asked why the costs paid to legal firms were less than the total costs paid under the scheme. It took three months, and repeated questions, Mr McNestry said, before the DTI revealed the UDM agreement.

Mr McNestry said the group made repeated attempts to discover who, within the DTI, had sanctioned the UDM deal, but was never given an answer.

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