The Government will end the use of the Bibby Stockholm barge for housing migrants off England’s south coast as part of an overhaul of the asylum system, the Home Office has announced.

The contract for the barge moored in Dorset will not be renewed past January as demand for such accommodation will be reduced by moves to clear the asylum backlog, the department said.

The vessel was one of several sites, including the military bases RAF Wethersfield in Essex and RAF Scampton in Lincolnshire, used by the previous Tory government in a bid to cut the cost of housing migrants in hotels.

But the new Labour Government said continuing the use of the Bibby Stockholm would have cost more than £20 million next year, and that scrapping it forms part of the expected £7.7 billion of savings in asylum costs over the next 10 years.

Dame Angela Eagle, minister for border security and asylum, said: “We are determined to restore order to the asylum system, so that it operates swiftly, firmly and fairly; and ensures the rules are properly enforced.

“The Home Secretary has set out plans to start clearing the asylum backlog and making savings on accommodation which is running up vast bills for the taxpayer.

“The Bibby Stockholm will continue to be in use until the contract expires in January 2025.”

The Government’s efforts to tackle the UK’s asylum backlog include redeploying more than 100 Home Office staff from working on the now-scrapped Rwanda deportation scheme to focus on a “rapid returns unit” to send people with no right to be in the UK back to their home country.

Asylum decisions will be accelerated and a new Border Security Command will use counter-terror powers to fight organised immigration crime across Europe.

Downing Street did not rule out the prospect of moving migrants from the Bibby Stockholm into hotels.

Asked later on Tuesday where people on the barge would be housed, the Prime Minister’s official spokesman said: “Decisions on accommodation will always be made on a case by case basis but the Government’s intention is to reduce expenditure on expensive accommodation.”

Asked how much progress the Government hopes to make by January 2025 in its efforts to clear the backlog, Number 10 declined to “make arbitrary targets,” saying only that it would be cleared “as soon as possible.”

The Bibby Stockholm, which can house up to 500 people, has faced a series of setbacks since it was commissioned in April 2023.

The discovery of dangerous bacteria led to its evacuation last summer just days after the arrival of the first asylum seekers, and it remained vacant for two months.

An Albanian asylum seeker, Leonard Farruku, who died while living on board the barge in December, is thought to have taken his own life.

Steve Smith, chief executive of refugee charity Care4Calais, said: “The Bibby Stockholm became the physical symbol for the last Government’s inhumane treatment of people seeking sanctuary in the UK.

“The despair and suffering the barge has caused will live long in the people who were residents of it. Nor will not renewing the contract bring back Leonard Farruku, whose family have lost their loved one forever.

“Whilst this is a sensible decision, at this very minute, we are in the High Court challenging the Government over the inhumanity being inflicted on over 500 men inside the Wethersfield camp. The current Government is choosing to fight this case when the solution should have been to end the suffering and close this camp too.”

This is an important step in the right direction towards fixing our, costly, chaotic and dysfunctional asylum system

Four former residents of one-time airbase RAF Wethersfield in Essex are taking legal action against the Home Office, claiming it acted unlawfully by housing them at the site when it was “not suitable” due to characteristics including being victims of torture and human trafficking or being disabled.

Imran Hussain, executive director of external affairs at the Refugee Council, said: “Clearing the backlog of asylum decisions reduces the numbers of people in the system who need to be accommodated.

“And ending the use of the Bibby Stockholm, and barges and hotels more generally, will make hugely important savings that help Government to fix the asylum system.

“For too long we have heard first-hand from refugees about life on the Bibby Stockholm, that it is prison-like, horribly overcrowded and isolated, with people unable to access the essential specialist support they need.

“Let’s remember that people onboard are people from conflict and war in places like Syria, Afghanistan and Iran, and simply want to be safe.

“This is an important step in the right direction towards fixing our, costly, chaotic and dysfunctional asylum system.”