LONDON (Reuters) - The British government will provide £1.5 billion to compensate policyholders of Equitable Life for their losses since the mutual insurer almost collapsed in 2000, the Daily Mail newspaper reported on Saturday.

If confirmed, the compensation package would be more generous than expected since an official review recommended a cap of £400 million, but fall short of Equitable Life's plea for full compensation of between £4 billion and £4.8 billion.

The coalition government will set out its plans on compensation for victims of the Equitable Life scandal as part of its Comprehensive Spending Review, which will be unveiled on Wednesday.

The government has said it aimed to implement a 2008 report by the parliamentary ombudsman which blamed the insurer's near-collapse in part on regulatory failure and recommended that policyholders receive compensation from the public purse.

In a report in its Saturday edition, released to journalists in advance, the Daily Mail said finance minister George Osborne was set to announce a £1.5 billion package next week. The newspaper cited government sources.

Britain's oldest mutual insurer, with 1.5 million policyholders at its peak, Equitable Life almost collapsed after being forced to honour unsustainable guarantees stretching back 30 years.

It eventually closed to new business in one of Britain's biggest financial scandals.