AN INDEPENDENT inquiry is to be held into a £7.5 billion government compensation scheme for sick miners, it was announced yesterday.

The external review comes after revelations in The Times about the financial relationship between three solicitors’ firms and a miners’ union that has earned several millions of pounds from the scheme.

Detectives have already begun a criminal investigation into the Union of Democratic Mineworkers and last week carried out a raid in connection with the inquiry.

Until this week the investigation was led by South Yorkshire Police’s economic crime unit, but The Times can disclose that the Serious Fraud Office (SFO) has taken control of the case.

An SFO spokesman said yesterday: “The SFO is conducting a joint investigation with South Yorkshire Police into suspected serious or complex fraud in relation to the handling of miners’ compensation claims and to the miners’ compensation scheme, which is administered through the Department of Trade and Industry.”

The independent inquiry into what has become the world’s largest personal injury compensation scheme was announced yesterday by Malcom Wicks, the Energy Minister.

He said that the review would examine “the integrity” of the Department of Trade and Industry’s administration of the scheme. It will also be asked to consider whether adequate measures are in place “to prevent, detect and pursue fraud”.

Discussions are taking place to determine who will head the inquiry and the Minister said that he expected its conclusions by the end of September.

Last month The Times revealed how senior officials and employees at the UDM benefited from a programme that was designed to compensate miners with respiratory disease or vibration white finger, a crippling hand condition.

The Nottinghamshire section of the UDM, which has only 984 members and was on the verge of bankruptcy in the mid-1990s, was able to earn £19 million — with pre-tax profits totalling £6.3 million since 1999 — by settling thousands of coal health claims in-house.

The seeds of the union’s spectacular financial recovery were sown when it signed a special agreement with the DTI in 1999 which allowed the UDM’s wholly-owned company, Vendside, to process and settle claims without using external solicitors.

The union also chose to pass on more than 16,000 claims to a select group of external solicitors’ firms that have earned £25 million for settling UDM cases.

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