Sixsmith given £180,000 to quit

More embarrassment for Byers after admission former aide never resigned, contrary to claims in Parliament

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Leading article: Spin cycle

Martin Sixsmith, the Department of Transport's former director of communications, will leave his job with a £180,000 pay-off – a deal that has provoked new allegations that Stephen Byers misled Parliament.

The Secretary of State for Transport, Local Government and the Regions suffered more embarrassment yesterday over the feud that destabilised his department after it was admitted that Mr Sixsmith did not resign with Jo Moore, special adviser to Mr Byers – contrary to what Mr Byers told the House of Commons on 26 February.

Mr Sixsmith's version of the events surrounding his departure from Whitehall appeared to have been vindicated with the publication by the Department of Transport, Local Government and the Regions (DTLR) of a statement backing his claim that he never agreed to resign. In his Commons statement in February, entitled "Resignation of Martin Sixsmith", Mr Byers repeatedly claimed Mr Sixsmith agreed to leave his job.

The Government has approved a £180,000 settlement for Mr Sixsmith, who had almost two years to run on his £100,000-a-year contract. He is believed to have been on a six-month notice period and the sum appears to represent twice as much as he might be expected to receive. He had threatened to reveal details of the affair at an employment tribunal.

Mr Sixsmith, who has been at home on full pay since 15 February, when Mr Byers announced the former BBC correspondent's "resignation", will leave the DTLR at the end of this month. The Independent has learnt Mr Sixsmith has landed another job in television, outside the BBC, which he will take up in June. He refused to comment last night.

The compensation deal could have been avoided if Mr Sixsmith had moved to another Civil Service post working on the Queen's golden jubilee. He would have accepted it if the Government had said publicly that he had done nothing wrong, but Mr Byers believed he should not be given another Whitehall job.

Although the Government hopes the settlement will draw a line under the affair, the Tories demanded a new Commons statement from Mr Byers.

Theresa May, the shadow Transport Secretary, said: "Stephen Byers told Parliament that Martin Sixsmith had resigned. This latest revelation suggests Mr Byers either misled Parliament, the press and the public or that he has no grip on his department. Either way, he must now come to the House of Commons and answer allegations that he misled MPs and spell out the cost of the compensation package offered to Mr Sixsmith."

The dispute that cost Mr Sixsmith and Ms Moore their jobs hinged on whether she had been warned by an internal e-mail not to announce rail performance statistics on the day of Princess Margaret's funeral.

Yesterday, the DTLR announced in a statement agreed with Mr Sixsmith: "The department accepts that Martin Sixsmith has remained in its employment since his contract began on 19 November 2001. He did not resign on 15 February 2002. The department regrets that, while acting in good faith, it announced he had resigned on what turned out to be an incorrect understanding of earlier discussions that day.

"Because of views expressed by the Secretary of State, Martin Sixsmith felt he had good reason to take his story to The Sunday Times. He regrets in hindsight that this exacerbated a breakdown in working relations between him and the Secretary of State."

A senior Whitehall official said: "Ultimately the story that lies behind this is Byers' extremely poor judgement in not getting rid of Jo Moore." Ms Moore sent a notorious e-mail on 11 September last year, declaring that it was a good day to bury bad news – an action that led to internal strife at the DTLR and culminated in the Sixsmith debacle.

Referring to yesterday's statement, the official added: "This is pretty strong stuff and highly unusual coming for a major Whitehall department. Clearly, Martin is in a very strong position. The department has done this very reluctantly. "

There was further embarrassment for Mr Byers when it emerged his department had exonerated Ian Jones, Mr Sixsmith's deputy, who was suspended on full pay for alleged leaks. Mr Jones is now waiting to be posted to another ministry in a similar capacity.

A colleague of Mr Jones said: "It was clear all the evidence against Ian was circumstantial. There was never any proof . It is just that security always seem to go for obvious candidates when it comes to leaks and invariably they get it wrong."