Harvey Proctor is to receive £500,000 compensation from Scotland Yard over its disastrous VIP child sex abuse inquiry.

The former Tory MP, falsely accused of being a killer by a fantasist known as ‘Nick’, is set for the enormous payout after a day of negotiations today.

In an astonishing out-of-court deal, the Metropolitan Police has also agreed to pay nearly £400,000 towards the 72-year-old’s legal bills.

The £900,000 settlement represents a humiliating climb-down by Dame Cressida Dick’s force, which has spent 18 months fighting Mr Proctor’s claim. It had hoped to get it struck out in court this month.

Harvey Proctor (pictured above in July) is to receive £500,000 compensation from Scotland Yard

A video interview (pictured above) with paedophile accuser Carl Beech. He was convicted of perverting the course of justice and fraud

The £900,000 settlement represents a humiliating climb-down by Dame Cressida Dick’s force, which has spent 18 months fighting Mr Proctor’s claim (Cressida Dick, pictured above)

The Met disputed his claim that he lost his job and grace-and-favour home on the Duke of Rutland’s Leicestershire estate as a result of Nick’s lies, but in a statement, the duke confirmed the former MP’s version of events.

Earlier this year, the Met offered Mr Proctor £150,000 to settle out of court. He refused and his lawyers said they would call Met Commissioner Dame Cressida and her predecessor Lord Hogan-Howe to give evidence if the case went to trial at the High Court.

The deal is one of the biggest compensation payouts ever made by the Met and dwarfs the £100,000 compensation paid to both ex-Armed Forces chief Lord Bramall and the widow of former home secretary Leon Brittan, whose homes were raided by officers during the shambolic abuse inquiry.

Legal sources said Lord Bramall and Lady Brittan, who settled out of the court without seeing a judge’s full, scathing report on Scotland Yard’s Operation Midland investigation – which laid bare the full extent of police blunders – should have received substantially more.

Earlier this year, the Met offered Mr Proctor £150,000 to settle out of court, which refused, he is pictured above with r Edward Heath's godson Lincoln Seligman and the son of late Labour peer Lord Janner, Daniel Janner QC

The Met caved in yesterday after Mr Proctor’s legal team thrashed out a deal with police lawyers at a meeting in central London, which was mediated by former director of public prosecutions, Lord Ken Macdonald QC.

Mr Proctor alleged that the Met had 'conspired' with with Nick – real name Carl Beech (pictured above)

Mr Proctor’s original claim against the Met was for more than £1 million in compensation for loss of earnings and damages, and a further £400,000 in legal costs. He had alleged that the Met ‘conspired’ with Nick – real name Carl Beech – and reporters from a controversial website, Exaro News, to ‘injure’ him.

This, he stated in a High Court document, resulted in him losing his job and his home, and also caused him to suffer ‘a major depressive illness’ and damage to his reputation. A key part of his legal action concerned a senior detective’s controversial public statement, at the outset of the police inquiry, that Beech’s allegations were ‘credible and true’.

Mr Proctor said his accuser’s allegations that he was a serial child sex killer were ‘inherently incredible, unreliable and untrue’, and that ‘elementary research’ by police would have exposed the truth. Dame Cressida agreed to settle with the former politician after a series of articles in the Daily Mail exposed the shambles of Operation Midland.

In July, retired High Court judge Sir Richard Henriques said police searches of the homes of Mr Proctor and others falsely accused by Beech, broke the law and ‘the course of justice was perverted with shocking consequences’.

In August, details emerged of a secret police warrant application showing detectives should never have raided the home of Lord Bramall. Earlier this month, Lord Bramall died without a single police officer being held to account.

A Mail investigation also exposed the ‘whitewash’ police watchdog inquiry that cleared five officers of misconduct, without even interviewing four of them.

Last month Sir Richard blasted police watchdogs over the ‘flawed’ and ‘lamentable’ inquiry, while another retired senior judge, Howard Riddle, said he had been misled by police into granting search warrants to raid the homes of Mr Proctor, Lord Bramall and Lord Brittan.

Former nurse Beech was jailed for 18 years in July over his VIP child sex abuse lies and other offences, including child porn crimes and voyeurism.

The Met’s inquiry into his bogus allegations of child rape and murder closed without a single arrest.

Mr Proctor, who has made criminal allegations against five former Operation Midland officers cleared by police watchdogs, could not be reached for comment last night.