Plans for a £3,000 "security bond" for some "high risk" overseas visitors to the UK are to be abandoned, the Home Office has confirmed.
The visa bond scheme was announced by Home Secretary Theresa May in June and was set to be introduced this month.
A Home Office spokesman confirmed a Sunday Times report that the policy would be scrapped.
The decision is thought to have been taken after Deputy Prime Minister Nick Clegg threatened to block it.
The aim of the scheme was to reduce the number of people from some "high risk" countries - including India, Pakistan, and Nigeria - staying in the UK once their short-term visas had expired.
Visitors would have paid a £3,000 cash bond before arrival in the UK - forfeited if they failed to make the return trip.
'Chaos'Mr Clegg initially proposed the idea of a visitor bond in March, but under his version of the policy it would only apply to people from "high risk" countries who had been refused a visa through the normal route.
Ben Moore BBC News
The scrapping of this bond will certainly prove embarrassing for Home Secretary Theresa May - and Labour will be keen to label it a U-turn.
The "visa bond" policy has been somewhat divisive in the coalition government, but was intended to be a flagship policy to show the government was getting tough on immigration.
It's an issue it is keen to puff its chest out on in the face of the growing popularity of UKIP.
But for now, the Home Office's immigration policy has hit a rough patch.
Less than two weeks ago, a roll-out of Home Office vans emblazoned with posters warning illegal immigrants to "go home or face arrest" was cancelled.
The home secretary herself was driven to describe them as a "blunt instrument".
Business Secretary Vince Cable later claimed the deputy prime minister's plan, which had suggested a bond of £1,000, had been deliberately misinterpreted by some of their Conservative cabinet colleagues.
"What Nick Clegg said was if somebody in the Indian sub-continent, for example, was turned down for a visa, they could, as an alternative, come up with a bond... But the way some of our colleagues interpreted [it] was in a much more negative way, of saying that everybody who comes here should pay this very large bond," Mr Cable said in September.
Mr Cable also criticised the level at which the bond was set and said that it had caused "outrage" in India.
He said both he and Nick Clegg would be arguing in government for a "much more sensible and flexible" approach to the policy.
Speaking to BBC's Andrew Marr show earlier this year, Mr Clegg said: "Of course in a coalition I can stop things," adding: "I am absolutely not interested in a bond which becomes an indiscriminate way of clobbering people who want to come to this country."
The bond idea was also floated several times by the previous Labour government but never implemented.
But that did not stop Labour's shadow immigration minister David Hanson launching an attack on the U-turn, accusing Mrs May of being "all over the place and presiding over an immigration policy in chaos".
'Go home' vansHe added: "Investors in India are now put off from investing in the UK whilst the Home Office fail repeatedly to do anything about their failure at our borders to stop and return illegal immigrants, failure to tackle backlogs in processing delays or enforcement of immigration rules within the UK."
Labour MP Keith Vaz, chairman of the Commons Home Affairs committee, said: "The home secretary is right to shelve the bond proposals. At the time she announced the pilot I warned her that bonds would not work.
"During this shambolic process the Home Office has managed to upset a number of foreign governments and confuse millions of potential visitors.
"This is not the way to fashion a strong and effective immigration policy."
The announcement comes two weeks after a roll-out of Home Office vans with posters warning illegal immigrants to "go home or face arrest" was cancelled.
Mrs May told MPs she accepted they had "not been a good idea" and were too much of a "blunt instrument".
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