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Expected pounds 65m settlement fuels Tarmac row

TARMAC, the UK's largest construction group, expects to receive pounds 65m in cash to settle a legal dispute with the Government.

The move will fuel the political row over payments to Tarmac, a big donor to the Tory Party. Last week, it was revealed that Tarmac was being paid more than pounds 100m to take the projects division of the Property Services Agency off the Government's hands. It was also reported that it could receive pounds 130m from legal claims for unpaid building work on the Trident missile and submarine base at Faslane in Scotland and the Hewell Grange prison in the Midlands.

But a Tarmac executive said yesterday that he thought the company would actually be paid pounds 65m from the Ministry of Defence and the Home Office to end the building disputes. 'But that has nothing to do with the PSA deal,' he said.

His view was rejected by Doug Henderson, Labour spokesman on local government, who has been pressing the Government for a full explanation. 'The issue is whether Tarmac would get this kind of money if it had to pursue its contractual claims through the courts,' he said.

In October, Environment Minister John Redwood said Tarmac would receive pounds 50m to take over the PSA business plus further payments to cover redundancies.

Later, it emerged that these extra sums included up to pounds 40m to cover immediate redundancies and a guaranteed pounds 30m for payments to civil servants taken on by Tarmac if the company goes bust within five years. Mr Redwood is likely to dismiss any talk of misbehaviour by officials of the PSA, which oversees government contracts to companies such as Tarmac. 'The PSA runs on rules of conduct so tight they would make Jesus uncomfortable,' said a senior Whitehall source.

At the same time, Tarmac is believed to be close to announcing a series of large disposals as part of the group's rationalisation. Its waste-disposal arm, Econowaste, is thought to have been sold for around pounds 75m. Sales of some quarries in the US are also understood to have been agreed.