Blind armed forces veterans will benefit from £1million thanks to fines paid by unscrupulous bankers.

Blind Veterans UK, which is based in Ovingdean, Brighton, will use the money from Armed Forces Covenant Libor fund to refurbish its seafront centre.

The sum, which was announced by the Treasury yesterday, comes from a fund created from penalties levied on banks over the manipulation of the Libor inter-bank lending rate.

It is the largest single donation the £35 million programme has made so far Brighton Kemptown MP Simon Kirby said: “It’s only right that those who behaved so badly should make a donation to those who have given so much to the country.

“Blind Veterans UK is a great charity doing amazing work and I am certain this money will be put to good use.”

The charity, which supports hundreds of vision-impaired ex-servicemen and women and their families, will invest the windfall in a major refurbishment of its 75-year-old care, rehabilitation and training centre.

Bosses claim the project will improve the quality of life for both permanent residents and those visiting on short stays.

Robert Leader, chief executive of Blind Veterans UK, said: “We are delighted that blind ex-servicemen and women will benefit from the Libor money.”

Mr Leader said the centre needed upgrading to ensure that it remains fit for purpose for the blind veterans who rely on the charity.

He added: “The Libor fund money will go a long way to helping us achieve that goal.”

The Armed Forces Covenant Libor fund was set up by the Chancellor George Osborne in 2012.

So far £9million has been distributed.

Mr Osborne said: “I am delighted that we have been able to provide this support to the armed forces charities, those that demonstrate the best of British values.

“It is right that these fines, levied on banks for manipulating the Libor rates, will be used to provide those serving, veterans and their families with the support they need.”

The remaining funds from the Armed Forces Covenant (Libor) Fund will be allocated over the next two years to be completed by March 2015.