Leading article: A hands-off approach with the opposite effect

The British Government has been left exposed after Megrahi's release

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Oh, what a tangled web Downing Street can weave, even when it may not actually be practising to deceive. The situation that the Prime Minister has got himself into – over the release of Abdelbaset Ali al-Megrahi, over relations with Libya generally and now over compensation for IRA bomb victims – is a muddle. And each successive effort by the Government to extricate itself only adds another knot. At the start of the party conference season, and with an election on the horizon, this is all grist to the political mill.

It is hard to see where the origins of the latest controversy lie. An idea seems to have been floated that Libya was ready to compensate victims of IRA bombs made with explosives supplied by Libya. The deaths and injuries date back more than 10 years, which does not make the claims either less reasonable or less just. President Gaddafi's son, Saif, appears to have sung two contradictory songs in recent days. In one, Libya was prepared to consider paying compensation; in the second, it was not. Number 10 does not have a monopoly on confused messages.

Nor is it entirely clear who reopened the subject of compensation. Libya's links with the IRA were believed to have been consigned to the past by the deal struck by Tony Blair in 2004, under which Libya renounced its nuclear programme and came in from the diplomatic cold. Did Libya raise it, in an effort to counter objections to the return of Megrahi? Did the IRA victims' group spot an opportunity? Or might it have been a trial balloon released by Number 10 in an attempt to sweeten the pill of Megrahi's ecstatic reception in Tripoli?

Why the compensation issue arose, however, hardly matters compared with the deleterious effects for the Government. Mr Brown was accused first of being supine in not pressing the Libyans for compensation – unfavourable comparisons were drawn with the deal obtained by Washington for US victims of Libyan bombs – and then of executing a U-turn, after it was announced that the Foreign office was to set up a group to support the IRA victims in their claims against Libya. Ministers both confirmed that such a group was being formed and denied that this represented any change in policy.

The two versions can just about be reconciled. The Government will support IRA victims in their claim, but will abide by the 2004 deal in not making it a state-to-state issue. But this comes perilously close to having your cake and eating it. Nor is it a million miles away from the diplomatic device inherent in Megrahi's release, whereby UK ministers could say that they had nothing to do with it – indeed, as Ed Balls said yesterday, that they disapproved of it – while Scotland took the flak. Noises off, mostly from the office of the UK Justice Secretary, Jack Straw, seemed to confirm and deny that oil played a role.

What should happen next? The IRA victims and their families deserve real help and the Foreign Office should use whatever tools are at its disposal to further their claim. If a deal over compensation was being secretly negotiated, it needs somehow to be put back on track. Unfortunately, the clearest message to emerge from Number 10 is the hopelessness of its communications. How much simpler it would have been if Mr Brown had come out at the start in support of the Scots, with regret that diplomacy, trade, justice and compassion at times make awkward bedfellows. That would have been the statesmanlike, and the brave, thing to do. With hindsight, it would have also saved a lot of trouble.

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