Written proposals on a compensation package for victims of IRA violence are to be drawn up this week and sent to Libya for consideration.

DUP MP Jeffrey Donaldson, who was one of a group of UK politicians who travelled to Libya for talks on the country’s involvement in arming the IRA during the Troubles, said victims’ groups are to be involved in the preparation of the proposals.

However, he did not confirm speculation that Libya is poised to pay as much as £1bn in compensation to people across Northern Ireland who were caught up in republican violence.

Semtex explosives supplied by Libya were one of the IRA's most lethal weapons in its decades-long terror campaign.

Links between the IRA and Colonel Muammar Gaddafi are thought to stretch back as far as 1972 and Libya is understood to have supplied the republican group with Czech-made Semtex in the 1980s.

Speaking to the Belfast Telegraph upon his return from Tripoli last night, Mr Donaldson said: “This was a very positive engagement with Libya and for the first time there is a serious discussion under way about these very important issues.

“Libya has now asked us to put forward written proposals which they will then consider and we hope further meetings will take place.

“The proposals will be sent this week and we are hoping to hear from them within the next few weeks and after that there will be a follow-up meeting.

“There does appear to be growing recognition on the part of Libya there is a need to resolve this matter. They have recognised that if relations between the UK and Libya are to be normalised then the victims can’t be forgotten in all that.”

Mr Donaldson and party colleague Nigel Dodds MP were part of a delegation of UK political representatives who travelled to Tripoli on Saturday to take part in a number of meetings at the invitation of the Libyan authorities.

As part of the discussions in Tripoli the UK delegation presented a proposal that Libya participate in a humanitarian programme for peace and reconciliation for the benefit of all affected in the UK — particularly in Northern Ireland — including substantial business and infrastructure investment, wide-ranging community development projects and closure for those who have suffered in the past, including resolution of existing claims by UK citizens involving Libya. In a joint statement issued last night, they said: “We were welcomed by the above and the Libyan people with great courtesy and firm expressions of friendship and a desire to develop co-operation between the UK and Libya in respect to the purpose of our trip.

“This has been a constructive and positive first direct engagement with the Libyan authorities. It constitutes a major milestone in our campaign on behalf of all those who have suffered because of Libyan involvement in helping IRA terrorism.

“We have come a long way but this remains a work in progress.

“The Libyan authorities were told of the community and cross-party support for the proposal within the UK, of support from influential Irish Americans and the desire for US involvement.

“By agreeing to participate, Libya and its leader Colonel Gaddafi would confirm a new and very important role for Libya in international relations and on the humanitarian world stage.”