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The chancellor has scrapped a controversial deal that saw the government receive billions of pounds from a pension scheme for mineworkers.

On Wednesday, Rachel Reeves announced the entirety of Mineworkers’ Pension Scheme would be handed over to ex-coalminers and their families.

The government had been entitled to half the surplus cash in the fund under a deal struck by the government when British Coal was privatised in 1994 - receiving £4.8bn over the last 30 years.

The change will transfer about £1.5bn into the pension pots of 112,000 former coalminers and their families, the ����ý understands.

Reeves said it would mean “working people who powered our country receive the fair pension they are owed".

Gary Saunders, Chair of the Mineworkers’ Pension Scheme Trustees, said: "We are delighted we will be able to put more money in our members’ pockets.

"We are also grateful to the many members and MPs who have shown support of the Scheme on this matter over the years.”

A pension trustee said the fund "will be writing to all members with the good news very shortly”.

During the election Labour promised to transfer the remaining pension funds back to members.

In March, the ����ý revealed that more than £420m from the scheme had flowed into the government’s coffers in the previous three years.

That was despite a 2021 report from a cross-party group of MPs that recommended the government stop taking money out and pay back some of what it had already received.

Conservative ministers rejected those recommendations. Data released to the ����ý under Freedom of Information laws showed the government had since received three annual payments of £142.4m.

Tens of thousands of families, mainly in the East Midlands, Yorkshire and the North East of England, benefit from the pension scheme, which was taken over by the government when British Coal was privatised in 1994.

The agreement was struck between the then-Conservative government and the scheme's trustees, in exchange for a government guarantee that the value of mineworkers' pensions would not decrease.

But campaigners had long argued that the deal was unfair to former miners and their families.

Then-energy minister Graham Stuart said last December that the government had received £4.8bn from the pension scheme since 1994.

Energy Secretary Ed Miliband said: "For decades, it has been a scandal that the government has taken money that could have been passed to the miners and their families.

“Today, that scandal ends, and the money is rightfully transferred to the miners.

"I pay tribute to the campaigners who have fought for justice- today is their victory.”