Colin Stagg wins £700,000

He described the compensation from the Home Office today as "like winning the lottery".

Mr Stagg, 45, who spent a year in custody before being cleared in 1994, may now sue the Met.

Police tactics in building the case against him were described by the independent government assessor this afternoon as involving "manipulation and deception, some of it of a highly reprehensible kind".

Miss Nickell, 23, a part-time model, was on Wimbledon Common with her two-year-old son in July 1992 when she was attacked and stabbed 49 times.

Mr Stagg, a loner who lived nearby, was arrested and charged but walked free when an Old Bailey judge threw out the case. Police had relied on evidence from an undercover policewoman who befriended Mr Stagg through a lonely hearts column.

Lord Brennan, QC, who granted the award, described the police tactics as "highly unusual and legally bizarre" and said they had contributed directly to his conclusion over the size of the payout.

He concluded: "I am quite satisfied that this amounts to misconduct in the investigation and prosecution of this case and I categorise it egregious."

The award is thought to be a record in a case of wrongful arrest.

Last year Robert Napper, 42, was charged with the murder of Miss Nickell. His trial is due to start at the Old Bailey in November.

Mr Stagg said he believed today's decision was the official vindication for being vilified for so long as someone who had "got away with murder".

He said: "I have endured that stigma for 15 years. It's fair to say it has ruined my life, yet until now I have never received the slightest apology from the authorities for my ordeal."

Speaking from his west London home, he admitted that the size of the pay-out had not yet sunk in. "I admit I got a bit emotional when I realised he wasn't. It means so much to me. A lot of wild figures had been bandied about, but what I wanted more than money was for people to realise they got it wrong.

"I thought the Establishment would just make a token payment, but this is like winning the lottery. What pleases me even more than the money is that this is effectively a public apology."

His solicitor Alex Tribick said they would now consider launching a compensation claim against the Met. But senior police officers believe Mr Stagg may have missed the legal deadline.

He said his client had been celebrating with a cup of tea and just wanted to "get on with the rest of his life."

Mr Stagg added: "I've no doubt there will be still be people who resent me getting this public payout - and some who actually still believe I'm guilty of murder. But over the years I've come to terms with my life - such as it is.

"The award is going to make a huge difference. I'm not going on a spending spree. I would like to buy my council flat, and I want to put in a new bathroom and kitchen and make a few changes in the garden."