Alder Hey parents offered £5,000 each in compensation

Parents involved in the Alder Hey scandal have been offered £5m in a compensation package, which will include public memorials to children whose organs were removed without consent.

The potential deal includes a public apology by a senior official from both the Merseyside hospital and the University of Liverpool.

A plaque would be put up at the hospital as part of the measures, saying: "This plaque is dedicated to the memory of children and pre-viable babies who died and from whom organs were wrongly retained in former times. This dedication acknowledges the role of parents in bringing about appropriate change."

The financial part of the deal, equivalent to about £5,000 each for more than 1,000 parents, is understood to be relatively low to ensure that the families' other requests, particularly the apologies, were met. Early indications were that the terms of the mediation, started to avoid lengthy litigation, would be agreed by the "substantial majority" of parents needed to end the action. But one relative told the Daily Post newspaper that the offer was a "complete insult".

If the settlement was agreed by a "substantial majority" of parents, it would be the first time that civil action brought by a group against the health service had been settled through mediation. Civil claims are settled only through financial payouts, yet the use of professional mediators allows other forms of redress to be included.

Other parts of the deal include individual letters of apology, a memorial fund and a contribution from the university to a charity. A hardship fund would be established to help those particularly badly affected by the scandal.

The families are expected to make their decision later this month. The mediation started at the end of September between lawyers for parents, the hospital and the University of Liverpool.

The university employed the Dutch pathologist Dick van Velzen as a researcher. He stockpiled children's body parts over seven years until 1995, without the knowledge of parents. Many families held second or even third funerals when body parts were found in a laboratory, years after the loss of their babies.

The 600-page official report into the scandal, published in January, described Professor van Velzen as a maverick.