Army deafness claims could cost the State £1 billion, the Minister for Defence warned.

Mr Smith said projections for the likely eventual cost of Army hearing-loss litigation were based on an estimate using the formula applied by the courts since the Hanley test case last July.

His Department had calculated that the cost for over 11,500 outstanding claims was in the order of £550 million, based on the pattern in cases to date.

If legal costs and damages for matters such as loss of earnings were included, the potential bill was in the order of £1 billion.

Mr Jim O'Keeffe (FG, Cork South West) said it was utterly outrageous that the taxpayer should be funding claims that went back up to 40 years. He suggested the Minister have discussions with the Minister for Justice to consider an amendment to the Statute of Limitations Act.

Mr Smith said he did intend to announce a deadline after which claims would be fought vigorously on the basis of the present Statute of Limitations Act.

The Minister said the total cost to date for hearing-loss claims was £59.5 million. By this week, a total of 13,710 claims had been received in the Department.

Of these, court awards following hearing had been made in 132 cases, at a cost of £2.3 million, while a further 113 cases were successfully defended or withdrawn. Out-of-court settlements had been reached in 1,910 cases, at a cost of £44.3 million. Legal costs of £13 million had been paid to date relating to 1,480 cases.

A total of 11,555 claims were outstanding, the Minister added.

Replying to the Labour spokesman on defence, Mr Jack Wall, he said there had been a significant downturn in the number of cases coming forward, from a weekly average of 121 last year to an average of 55 this year, to currently about 40.

Annual administrative costs were currently estimated at about £2.3 million, said the Minister. This was made up of £750,000 for staff and overheads in the Department of Defence, £850,000 for staff and overheads in the Defence Forces, and £795,000 for staff and overheads in the Office of the Chief State Solicitor.

The Fine Gael spokeswoman on defence, Ms Frances Fitzgerald, suggested it was time to set up a tribunal to deal with the claims.

Mr Smith said it was his priority to achieve an out-of-court environment, but he was handicapped in doing that because the Hanley case had raised the ante.