Veterans dismissed from the armed forces for being gay say the government is offering insufficient compensation.

The total amount available has been capped at £50m and the National Audit Office says up to 4,000 are expected to be eligible, meaning an average payout of £12,500 each.

Now, several charities, including the Royal British Legion, have written to the prime minister to demand the cap is raised.

The Ministry of Defence (MoD) said the treatment of former personnel was “wholly unacceptable” and that it would provide more details of the compensation scheme later in the year.

The veterans minister recently announced the scheme would launch in January.

Compensation was one of more than 40 recommendations made by an independent review, in July 2023. The Ministry of Defence (MoD) says it has already delivered more than 30 of them.

But leading veterans’ charities say £12,500 is “inadequate and unacceptably low” and “does not bring about the sense of justice these veterans deserve”.

Homosexuality started being decriminalised in the UK in 1967 but a ban continued in the armed forces until 2000.

Those who were – or were considered – gay were often subjected to lengthy investigations before being discharged from the military.

Some went to prison as recently as 1995.

Stephen Close, now 62, was convicted of the sexual offence of gross indecency after kissing another man while stationed in Berlin in the 1980s.

He was discharged from the Army, subjected to interrogation and a “humiliating and degrading medical examination” and sent to military prison for four months.

Mr Close, from Salford, lived as a convicted sex offender for 30 years before being pardoned in 2013.

“It’s not just the Army – my whole life was cut short from that day on,” Mr Close said.

“I couldn’t adopt, I couldn’t foster, I couldn’t work in any profession whatsoever.

“It was a massive strain on my mental health – and I’m still struggling today with it.”

Mr Close said he lived under constant financial pressure after struggling to find work because of his conviction, adding that the compensation being offered was insufficient.

“All those decades of struggling, and all they can offer is that?” he said.

The LGBT Veterans Independent Review, which began in 2022, heard about the experiences of 1,145 veterans.

Led by Britain’s first openly gay judge, Lord Etherton, it revealed decades of bullying, assaults and expulsions of LGBT servicemen and women – often leaving them without income or pensions.

On the report’s release, then Prime Minister Rishi Sunak apologised in Parliament, calling the ban “an appalling failure” of the British state.

In their letter to Sir Keir Starmer, the veterans’ charities said £12,500 payouts would “not honour the service and sacrifice of a community who faced treatment Lord Etherton described as ‘a stain upon the illustrious history of the armed forces’.”

They said the ban had been “a policy enforced for decades with cruelty and zeal”.

Some LGBT veterans recently awarded a special badge by the MoD to acknowledge the injustice they faced, including Mr Close, told BBC News they would refuse to wear it until compensation was paid.

Many of the other recommendations, such as the return of medals and berets, have already been put in place.

Several others are in progress, including the building of an LGBT veterans memorial and the clarification of pension rights.

Campaigners have previously raised concerns elderly and ill veterans need compensation paid quickly.

Craig Jones, from campaign group Fighting with Pride, said: “This is the moment for the government to do the right thing”.

The MoD said it was “fully committed to ensuring this issue receives parliamentary scrutiny”.