Phil Fontaine, the national chief of the Assembly of First Nations, said: “Today marks the first step towards closure on a terrible, tragic legacy for the thousands of First Nations individuals who suffered physical, sexual, or psychological abuse.” Mr Fontaine, who attended a residential school in Manitoba, has worked for years to secure compensation.

Most of the 130 schools closed in the 1970s and many survivors are now of pensionable age, while others died without seeing any compensation for alleged beatings and rape.

Mr Fontaine added: “This settlement package will contribute to the journey on the path to healing — not only for all residential school survivors, but for their children and grandchildren. For they too, have suffered the effects of this abuse.”

Under the system set up at the start of the last century, native children were often sent hundreds of miles away to the remote residential schools. In an attempt to assimilate Canada’s First Nations into mainstream society, they were forcibly separated from their families and forbidden from speaking their language.

About 15,000 former pupils had brought legal claims against the Government and the Roman Catholic, Anglican, Presbyterian and United churches that ran the schools. These claims must be dropped as part of the the deal.

It includes Can$60 million for a truth and reconciliation commission to promote awareness of what happened. The churches will contribute.

Archbishop Andrew Hutchison, Primate of the Anglican Church of Canada, said he hoped the package would bring a “just and lasting solution”.

Irwin Cotler, the Justice Minister, said the abuse was “the single most disgraceful, racist and harmful act” in Canadian history.

http://www.timesonline.co.uk/article/0,,11069-1890035,00.html