Plans to make higher earning tenants living in social housing in England pay a higher level of rent to continue living there have been scrapped by the UK government.

The u-turn was announced in a Parliamentary statement yesterday by housing minister Gavin Barwell who said minister had “listened carefully” and decided not to proceed with the policy, which had been dubbed ‘pay to stay’.

Initially announced in July last year and published for consultation the following October, the policy would have applied to social housing residents in England earning £31,000 or £40,000 in London.

Councils and housing associations would be able to decide whether to impose higher rents, the government said.

The government backed away from forcing the policy on housing association tenants in December, before Mr Barwell yesterday announced the policy would no longer be compulsory for councils.

He said: “We have listened carefully to the views of tenants, local authorities and others and as a result, we have decided not to proceed with a compulsory approach. Local authorities and housing associations will continue to have local discretion.

“The government remains committed to delivering its objective of ensuring social housing is occupied by those who need it most. But we need to do so in a way that supports those ordinary working class families who can struggle to get by, and in a way which delivers real savings to the taxpayer. The policy as previously envisaged did not meet those aims.”

Mr Barwell also confirmed the government would be ending the right of social housing tenants to stay in their homes for life, by introducing compulsory fixed-term tenancies.

This, he said, will mean tenancies are periodically reviewed “to ensure tenants still need a socially rented home”, with councils told to prioritise lower-income households.

He added that the government was exploring other ways to ensure higher-earning tenants “make a greater contribution to costs”.