The home secretary is set to pay compensation for wrongful imprisonment to two former nursery nurses who won a libel case after being accused of child abuse, writes Amy Taylor.

Christopher Lillie was in jail for 10 months and Dawn Reed for 14 weeks. The size of the sum, which is also for being wrongfully charged, is as yet unknown, but is expected to be announced by the end of next year.

Lillie and Reed were originally charged with abusing children at Shieldfield nursery in central Newcastle in 1993, but were acquitted a year later. Newcastle council launched an independent inquiry after pressure from parents of children at the nursery. The resulting report  'Abuse in Early Years', published in November 1998, said the pair were guilty of sexually abusing children in their care.

The pair then launched a successful libel action against the council and the authors of the report, who all had backgrounds in social work.

Speaking at the end of the six-month libel trial in July, Mr Justice Eady concluded that there was no basis for the review team's allegations, and condemned the review process as a "shambles" that denied Lillie and Reed basic legal safeguards. He awarded them £200,000 each in damages.