Home Secretary Shabana Mahmood has scrapped plans to make foreign care workers already in the UK wait 15 years to qualify for permanent settlement.
Mahmood had proposed doubling the wait for indefinite leave to remain (ILR) from five years to 10 for most migrants, with some facing a 15-year wait.
But following a backlash from several Labour MPs, Mahmood revised the policy and care workers who earn at least £25,000 a year and arrived in the UK before May 2025 would continue to qualify after five years.
The Conservatives said Mahmood's "U-turn" would cost taxpayers billions of pounds.
ILR, also known as settlement, gives a person the right to live, work and study in the UK for as long as they like and apply for benefits if they are eligible. They can also use it to apply for British citizenship.
Last November, Mahmood announced plans to delay settlements in response to concerns over the number of people approaching eligibility, in the wake of record post-Brexit net migration figures under the previous Conservative government, nicknamed the "Boriswave".
Asked by the BBC whether she had u-turned on her earlier promises, she replied "I don't accept that", adding that some 500,000 people in the UK "will not now settle at five years".
"They will have to wait longer before they can achieve settlement in this country, and I've come to a fair resolution for care workers," she said.
The home secretary refused to say what the cost will be of scrapping her plans.
When she put forward the original plans in March, the Home Office used data from the committee which advises ministers on migration to forecast that the existing rules would cost £4.2bn. This was the estimated lifetime cost of the 117,000 foreign care workers expected to settle in the UK from 2026-2030. It estimated this would rise to £9.5bn once their adult dependants were factored in.
Mahmood told the BBC updated plans would save "billions", partly because workers in other sectors will still have to wait longer, but said an impact assessment detailing the cost would be released in a future announcement.
She also declined to outline whether Prime Minister Andy Burnham had told her to change tack on her proposals, which she had put forward under his predecessor Sir Keir Starmer, saying a consultation had resulted in a fair settlement.
The Conservatives said her "U-turn" will cost the state billions of pounds.
The Home Office has said its figures show net migration - the difference between those entering and leaving the country - added 2.6m people to the UK population between 2021 and 2024.
The department estimates that between 2026 and 2030 between 1.3m and 2.2m people will settle in the UK, adding its central estimate has increased to 1.9m.
The home secretary faced criticism for proposing to apply the changes to migrant workers already in the UK, with Housing Secretary Angela Rayner previously saying this would "change the goalposts".
Several Labour MPs also described the retrospective approach as "un-British" and warned it could worsen the UK's skills shortage, particularly in the care sector.
Making a statement to the House of Commons, Mahmood said settlement "should not be automatic, it should be earned".
The changes will move those earning less than £50,000 a year onto a 10-year path to settlement status, unless they are exempt.
Mahmood also told MPs the government would provide a five-year path to settlement for care workers who "answered our call when we needed them" following the Covid-19 pandemic.
Mahmood said: "Those who earn £25,000 a year working in the social care sector, which was the condition of their visa, will therefore be able to settle on their existing five-year path."
She added those care workers who did not meet the conditions of their visa could apply for another five-year visa and seek settlement after that.
MPs were also told:
higher earners on salaries of more than £50,000 and those who have contributed in healthcare and education, such as doctors and teachers, will be able to qualify for settlement after five years
the highest rate taxpayers earning more than £125,000 will be able to apply after three years
refugees who arrived in the UK after crossing the Channel by small boat or another illegal route will have to wait 20 years if they work or study, and 30 years if they do not.
Mahmood said: "Our changes ensure those who are net contributors are encouraged to come to this country and stay here."
She added: "As a result, the Department for Work and Pensions estimates that our reforms will reduce the benefits bill by billions of pounds."
The original version of the plans announced by Mahmood last year would have delayed 799,000 people from gaining permanent residency. Under the updated plans announced on Monday, that number would drop to 517,000.
One of those affected was Ashfak Juned, a Bangladeshi chef working in Birmingham, who told the BBC he was "crying" when he heard his wait for settled status would now last until 2033.
Liberal Democrat home affairs spokesman Max Wilkinson said the government's reforms were "unravelling".
He added: "Viewing immigration simply as a matter of raw numbers and images of small boat arrivals is degrading this nation's ability to have the informed national discussion that we need."
Reform UK leader Nigel Farage said Mahmood had "shown her true colours".
"She talked a big game on immigration but has u-turned at the first sign of trouble from her left wing Labour colleagues," he said.
Pointing to Home Office estimates that more than 200,000 immigrants arriving on Health and Care visas would be eligible for British citizenship before the next election, he claimed this would cost the taxpayer £50bn over their lifetimes.
He vowed to review citizenship of all those arriving on care visas from today and extend the qualifying period for citizenship to a minimum of 10 years.
Green Party MP Siân Berry said Mahmood had provided a "new obstacle course of hoops and barriers" for migrants living in the UK.
On Monday, the Institute for Public Policy Research (IPPR) think tank said that skilled workers and their dependants due to settle in the UK under current rules are expected to make a net lifetime contribution of around £115bn through the taxes they pay.
