A leading lawyer in the case, which has lasted eight years, said that senior managers at the now defunct British Coal should "hang their heads in shame for what they did" to their employees.
Yesterday's agreement - which involves payments of between pounds 5,000 and pounds 10,000 for most of the 40,000 sufferers - represents the highest compensation award so far against a single employer.
The deal agreed at the High Court in Manchester for former pitmen afflicted by "vibration white finger" paves the way for a wave of claims later this year for a much bigger settlement due for miners suffering serious chest complaints.
Lawyers calculate that the Government has set aside pounds 1.5bn to compensate those with lung disease. The total of pounds 2bn for both injuries is the equivalent of a penny in the pound on the basic rate of income tax.
Some miners compensated by the deal yesterday will receive "significantly more" than pounds 10,000 and workers who suffered the most from the affliction - caused by prolonged exposure to vibration from machine tools - are also due to receive other payments for loss of earnings.
Tom Jones, of the solicitors Thompsons, said he was delighted by the result. "This is a major breakthrough for miners after fighting for justice for so many years. The compensation seems a lot, but it is based on serious injuries inflicted on miners by British Coal. Tens of thousands of miners face a life of pain with an incurable disease and no money will put that right. Those who ran British Coal should hang their heads in shame for what they did."
Vibration white finger affects blood circulation and hand function. Sufferers find it hard to pick up small objects or undo buttons. Some have had fingers amputated.
Andrew Tucker, of the Irwin Mitchell law firm, predicted that a settlement for former pit workers with lung complaints would come within the next few months. "At long last the compensation will be agreed and the men suffering from these diseases will begin to receive payment soon," he said.
The legal action that resulted in yesterday's settlement began in 1991 against the former British Coal. Dave Guy, Durham area president of the National Union of Mineworkers, accused both British Coal and the Department of Trade and Industry of delaying tactics: "They must be condemned for dragging things out so long," he said.
The Energy minister, John Battle, welcomed the deal and said it would pave the way for the settlement of cases involving lung disease. He announced the establishment of 10 testing centres in former coalfield areas to assess damage to injured miners.
His department estimated that a 54-year-old man with moderate disability would receive pounds 5,000, while someone under 45 with severe problems would be awarded up to pounds 18,000.Reuse content