Portraits of the Queen and the Duke of Edinburgh were replaced after a civil servant complained, Lord Maginnis said

Lord Maginnis told Parliament that Lee Hegarty, who was subsequently promoted to become secretary and accounting officer of the Parades Commission, had been paid the money after he complained, but the situation had been “shrouded in secrecy”.

Lord Maginnis, the former Ulster Unionist MP for Fermanagh and South Tyrone, said that “this quite scandalous episode” now undermined Mr Hegarty’s role at the quango which regulates parades.

Speaking in the Lords on Wednesday night as the Northern Ireland (Executive Formation) Bill was debated, Lord Maginnis said: “It has come to my attention that around £10,000 was paid in compensation to a civil servant who was offended at having to walk past portraits of Her Majesty the Queen and the Duke of Edinburgh.

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“This individual, who had worked in the NIO for between 15 and 20 years, claimed that under human rights legislation it was unfair to him to have to work where he was offended by portraits. The portraits were removed and the offended party, a Mr Lee Hegarty, was consulted on what should replace them.”

Lord Maginnis went on: “He suggested that the portraits of Her Majesty the Queen and the Duke of Edinburgh should be replaced with photographs of, at best, the Queen meeting people during engagements in Northern Ireland.

“One such photograph features Her Majesty the Queen shaking hands with the former deputy first minister, Martin McGuinness, at the Lyric Theatre in Belfast.

“I do not mind that; what I mind is that the case brought by the complainant was settled secretly and that the sum of £10,000 was handed over, presumably for hurt feelings and distress.

“This settlement was signed off by the then secretary of state, Theresa Villiers MP, on the recommendation, I am informed, of her permanent secretary Jonathan Stephens.

“I have been told to look at the annual accounts to find out where the money came from – but it is not to be found. That should concern us.”

Lord Maginnis said that last year, some time after the compensation, Mr Hegarty was promoted to become accounting officer of the Parades Commission.

Addressing a largely empty House of Lords, the peer contrasted what he said had happened with the civil servant to the years of delay in compensating victims of historical institutional abuse in Northern Ireland, who he said had been “shamefully left out in the cold when it comes to their justifiable claims for compensation”.

He added: “This is scandalous. It is an indictment of the Northern Ireland Office and of this government.

“We have lost all sense of reality when a portrait of Her Majesty can cause offence to a civil servant but we do not bat an eyelid when we deny closure and justice to unfortunate people who have been abused in the most outrageous manner imaginable.

“I urge the Northern Ireland Office not only to restore the original portraits of Her Majesty and the Duke of Edinburgh but to expedite payment of the comparatively paltry compensation due to the people who are more deserving than this opportunistic civil servant who, surely, must now be compromised in his position in the Parades Commission because of his bigoted stance over the Royal Family.”