Millions to be paid in compensation for prisoners who alleged UK complicity in torture and extraordinary rendition

The government will announce today that it will pay millions of pounds in compensation to former Guantánamo Bay detainees following weeks of negotiations between lawyers for the government and the former prisoners.

Ministers appear to have decided on the advice of the security services that they could not afford to risk the exposure of thousands of documents in open court on how Britain co-operated with the US on the so-called extraordinary rendition of terrorist suspects.

Some of the suspects, who were taken for interrogation in secret locations around the world before ending up in Guantánamo, were alleged to have links with the Afghan Taliban.

According to ITN, the high court has been notified that a settlement had been reached between the lawyers. The exact amounts may never be known, but at least one detainee is understood to be in line for a payout of more than £1m.

The government will announce simply that the payments are to be made and that it is in the national interest that the cases are not brought to court so as to protect the security services' methods from scrutiny.

Two independent QCs have been acting as arbiters between the two sides. One allegation is that the British government knew they were being illegally transferred to Guantánamo Bay but failed to prevent it.

David Cameron paved the way for the payments by sanctioning the negotiations in July.

Cameron acted after the high court ruled confidential documents would have to be released in any court hearings. Vetting such documents, possibly as many as 50,000, would take huge amounts of time for MI5 and MI6, Cameron said.

Today's payments will clear the way for an independent inquiry into British involvement in torture and the degree to which MI6 knowingly took information extracted by torture by the Americans.

Cameron announced in July he believed there was no alternative but to roll up the many existing civil claims against the government taken by the alleged victims of torture.

He said the settlement of the claims would allow an inquiry to be undertaken, chaired Sir Peter Gibson, former senior court of appeal judge and currently the statutory commissioner for the intelligence services. The inquiry, ranging over alleged British complicity in torture, is due to report by the end of next year.

Earlier this month former US president George Bush claimed that controversial interrogation techniques, such as waterboarding, had protected the UK from further terrorist attacks. David Cameron rejected the comments.

Those detainees understood to be in line for settlements include Binyam Mohamed, Bisher al-Rawi, Jamil el-Banna, Richard Belmar, Omar Deghayes, Moazzam Begg and Martin Mubanga.

The payments will be controversial with some claiming the former prisoners are using the courts to extract cash from a British state they allegedly intended to destroy.

Others will praise the courts for forcing the UK to either openly admit the methods it had sanctioned, or else pay a financial penalty through compensation.

The payout is bound to be seen as a blow to the reputation of the former foreign secretaries David Miliband, Margaret Beckett and Jack Straw for allegedly eroding civil liberties. Their reputations will turn more on the outcome of the Gibson inquiry.

Explaining the decision to open talks, Cameron told MPs on 6 July: "Our services are paralysed by paperwork as they try to defend themselves in lengthy court cases with uncertain rules. Our reputation as a country that believes in human rights, justice, fairness and the rule of law – indeed, much of what the services exist to protect – risks being tarnished.

"Public confidence is being eroded, with people doubting the ability of our services to protect us and questioning the rules under which they operate. And terrorists and extremists are able to exploit those allegations for their own propaganda."

The Cabinet Office said last night: "The prime minister set out clearly in his statement to the house on 6 July that we need to deal with the totally unsatisfactory situation where for 'the past few years, the reputation of our security services has been overshadowed by allegations about their involvement in the treatment of detainees held by other countries'.

"The government will lay a written ministerial statement, updating the house on progress, tomorrow morning."