The Government has agreed to pay more than £2 million to the family of a Libyan dissident after accepting its role in his illegal rendition.

Sami al Saadi, a leading Gaddafi opponent, was imprisoned and tortured after he was forced back to Tripoli along with his wife and four children in 2004 in a UK-US-Libyan operation.

The operation in 2004 followed former prime minister Tony Blair's so-called "deal in the desert" with Colonel Gaddafi, which saw companies such as BP secure lucrative oil deals and paved the way for the hugely controversial release back to Libya of the only man convicted of the Lockerbie bombing, Abdelbaset Ali Mohmed al Megrahi.

Ministers are now understood to have offered Mr Saadi a sum of £2.2m, but the Government has not admitted liability, Mr Saadi said. "My family suffered enough when they were kidnapped and flown to Gaddafi's Libya.

"They will now have the chance to complete their education in the new, free Libya. I will be able to afford the medical care I need because of the injuries I suffered in prison.

"I started this process believing a British trial would get to the truth in my case. But today, with the Government trying to push through secret courts, I feel that to proceed is not best for my family.

"Even now, the British Government has never given an answer to the simple question: 'Were you involved in the kidnap of me, my wife and my children?'

"I think the payment speaks for itself. "

Mr Saadi was living outside Libya to avoid Gaddafi's agents before he and his family were put on a plane in Hong Kong and flown to Libya, where they were imprisoned. Mr Saadi was held and tortured for a number of years.

Evidence of the UK's hand in the operation emerged after the fall of Gaddafi's regime, lawyers Leigh Day & Co said. CIA correspondence with Libyan intelligence, which was found in an office belonging to Moussa Koussa, the head of Gaddafi's intelligence agency, apparently stated: "We are - aware that your service had been co-operating with the British to effect[Sami al Saadi's] removal to Tripoli - The Hong Kong government may be able to co-ordinate with you to render [Sami al Saadi] and his family into your custody."

A Government spokeswoman said: "We can confirm that the Government and the other defendants have reached a settlement with the claimants. There has been no admission of liability and no finding by any court of liability."