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A memo from Strachan Heppell to the CMO, the Minister of State for Health and the Secretary of State set out the options for responding to the litigation.

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A note to ministers on the haemophilia AIDS Litigation invited Ministers to review the government's position in light of: (i) Mr Justice Ognall's statement to consider an out-of-court settlement; (ii) advice from Counsel; and (iii) the Regional Directors of Public Health submission.

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A submission from regional directors of public health on HIV litigation was submitted.

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Kenneth Clarke was in favour of sticking to the Government's legal defence and continuing to fight the litigation. He did not deem it necessary at that stage to send a memo to the Prime Minister.

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Kenneth Clarke sought to discuss the issues of settlement with the Chief Secretary to the Treasury.

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A memo from Stephen Bowden to Andrew Edwards outlined a phone call between the Chief Secretary and the Secretary of State for Health. They had agreed that there were no grounds for offering an out-of-court settlement in relation to people with haemophilia with HIV.

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In his oral evidence, Lord Clarke said that he did not approve the idea that the central defendants should settle the litigation but thought that once the case had run its course and the expected judgment in favour of the Government had resulted, a substantial payment would then have been made to the Macfarlane Trust.

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The plaintiffs' lawyers wrote to the central defendants in response to Mr Justice Ognall's observations and proposed that consideration be given to a settlement.

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A Department of Health summary of the campaign for the settlement was provided in a briefing to the next Secretary of State.

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The Department of Health produced a summary of the campaign for the settlement.

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The health authorities encouraged Pannone Napier to explore with the other solicitors for the plaintiffs whether they could agree a realistic settlement figure which could be offered to the Department of Health.

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At a meeting between counsel for the central defendants and lead counsel for the plaintiffs, the Government lawyers indicated that they could not initiate a compromise but were prepared to listen.

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The steering committee of the plaintiffs met and a further meeting between counsel for the parties was arranged.

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The figures in the proposed scheme of compromise were to cover all the people with haemophilia registered with the Macfarlane Trusts as well as all the plaintiffs.

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In his oral evidence, Justin Fenwick KC gave greater detail in relation to the proposed settlement.

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Lord Waldegrave told the Inquiry that there was a moral responsibility for the Government: that it would have been a horrible experience for those making the case to have to go to court, and damaging for the Government because of the bad press they would receive for being heartless.

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Lord Waldegrave told the Inquiry that he was advised by the Department of Health and by the Treasury that the proposed settlement figure was "on the high side".

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Lord Waldegrave told the Inquiry that he was anxious for speed when is came to settlement.

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Lord Waldegrave told the Inquiry he considered there were two arguments which were key to winning the argument with the Treasury regarding the settlement. "The victims' lawyers have come forward with an offer that they say will be seen as fair by their clients. This will not recur, we've got to do this and do it quickly. And look at the numbers; you can afford them, we can afford them."

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In his oral evidence to the Inquiry, Lord Waldegrave explained his reasons for wanting to announce an agreement in principle whether or not there had been any agreement with the plaintiffs' representatives, and in circumstances where the plaintiffs themselves clearly would not all have agreed.

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