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A letter from Peter Kendall to the Secretary of State explained that that a sum around £12 million could be found from the Departmental Votes in 1992-1993 if Secretary of State saw this demand as an overriding priority.

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A letter commented that the Secretary of State recognised "the difficulty in providing resources from the Reserve which your officials have explained to mine" and that he would "investigate what scope there may be for longer term action on the blood transfusion patients."

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Officials recommended that the Chief Secretary request the return of the £6 million the Secretary of State had said he could contribute to the payment scheme to defray the overpayments to doctors and dentists.

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The Department of Health's public position remained that financial support for those infected with HIV would not be extended beyond people with haemophilia.

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Ahead of a meeting with John Marshall MP, the Prime Minister was provided with a Department of Health briefing.

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William Chapman suggested that the "Government's position seems increasingly untenable".

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The Prime Minister highlighted the risk of a precedent being set which would lead to no-fault compensation, as well the importance of a clear ring-fence, and agreed to consider the matter further.

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The Chief Secretary decided that he "would be willing to agree to Mr Waldegrave proceeding with compensation if it was agreed that no further groups would be given similar treatment; and if Mr Waldegrave found all the necessary funds."

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The Secretary of State wrote to the Prime Minister to make the case for extending financial support to transfusion patients infected with HIV. In doing so, he acknowledged that the Government had to "recognise the risk of weakening our general opposition to no fault compensation" and suggested that it should make plain that it was responding to "very special circumstances". He also addressed a proposed division of funding between the Department and Treasury.

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While the chief secretary reiterated his concern about ring-fencing and moving towards no-fault compensation, he explained that he was "willing to withdraw my objection provided you are able to give a firm assurance that you and your department will be prepared to draw the line at this group and to face up to requests from other groups." He further asked that the Department of Health find the necessary funding without any contribution from the Treasury Reserve.

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Correspondence between the Prime Minister's office, the Department of Health and the Treasury continued on the details and timing of the Government's announcement that it would be extending financial payments.

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A letter from William Chapman to Chris Padwick outlined the Prime Minister's concern over the progress on those people without haemophilia infected with HIV through blood transfusions.

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The Secretary of State responded to the Chief Secretary arguing that "a borderline covering all those infected with HIV by NHS treatment" would be more defensible.

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The Chief Secretary responded accepting the Secretary of State's judgement on the borderline being more defensible, noting that funding would come from within the Department of Health's existing resources.

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A parliamentary question from Sir Michael McNair-Wilson was answered by William Waldegrave, the Health Secretary, with a table showing the amounts of payments to be made.

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Officials sought the Secretary of State's agreement to the outline of a payment scheme.

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The payment scheme proposal was accompanied by a scheme outline that presented the scope of the scheme, the numbers eligible, the rates of payments, medical criteria, conditions, procedures for assessing and making payments, as well as time limits for payments.

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The Secretary of State confirmed his agreement to the approach proposed by officials.

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Lord Waldegrave's evidence to the Inquiry noted that it took until February 1992 for the Government to change its position because it took that much time to overcome the arguments of precedence.

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In his evidence to the Inquiry, Sir John Major added that the time taken for the Government to change its position was due to arguments on precedent, need and affordability.

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