Government plans to force visitors from "high risk" countries to pay a £3,000 security bond to enter the UK have been scrapped, it has been confirmed.
It is a further blow to Home Secretary Theresa May, who only recently was forced to U-turn over controversial "go home" migrant vans, admitting it had been a "blunt instrument".
The security bond scheme was due to be piloted from this month as a way of deterring temporary visitors from staying on in the UK after their visas expire.
It had been suggested that visitors from India, Pakistan, Sri Lanka, Bangladesh, Ghana and Nigeria would be required to pay the deposit for a six-month visa, but the scheme has now been ditched.
A government spokesman said: "The Government has been considering whether we pilot a bond scheme that would deter people from overstaying the visa. We have decided not to proceed."
Earlier this year, the scheme was condemned as "highly discriminatory" by Indian business leaders, and Nick Clegg indicated he would block the plans if they were applied in an "indiscriminate way".
The Home Secretary only recently scrapped the controversial 'go home' vans The Deputy Prime Minister has previously called for a bail-like system of security bonds to tackle visa abuse.
The announcement of the measure by the Government followed UKIP coming second to the Lib Dems in the Eastleigh by-election, where its campaign focused on tightening immigration controls.
The scheme was part of the Government's drive to cut net migration into the UK to the "tens of thousands" by the time of the next general election in 2015.
Shadow Immigration Minister David Hanson said: "After ad vans and texts to the wrong people, it seems David Cameron's Government can't get anything right when it comes to dealing with illegal immigration.
"Theresa May is all over the place and presiding over an immigration policy in chaos."
He added: "Chasing headlines followed by confusion and U turn is no way to manage an effective and robust immigration policy that works for all concerned."
The bonds were dropped because they had no support from the Liberal Democrats or within a number of government departments, it has been claimed.
Among the departments understood to be opposed to the plans are the Foreign Office, Department for Business, Innovation and Skills, and the Department for Communities and Local Government.
"The Home Office version of the policy was not acceptable to the Liberal Democrats and was not support by other government departments," Lib Dem sources said.
"They have seen the writing on the wall and binned it off. We have been clear from the start that the version was just not acceptable to us."
Speaking when the plans were first announced, the Confederation of Indian Industry (CII) described it as "highly discriminatory and very unfortunate", warning that it could delay agreement on an EU-India trade deal.
"The suggested changes are not only discriminatory they are also against the special relationship' publicised by the UK government," it said.
"We share UK's concern on illegal immigration, but surely there are other more effective and non-discriminatory ways to put a check on it."
The CII's complaint was echoed by the chairman of the Commons Home Affairs Select Committee, Labour MP Keith Vaz, who described the scheme as "unfair and discriminatory".
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