By Andrew Osborn
LONDON (Reuters) - Britain has scrapped a plan to force people from certain African and Asian countries to pay a cash bond in return for a visitor's visa after it caused an outcry at home and abroad and exposed a rift in the governing coalition.
In a move that political rivals said showed Prime Minister David Cameron's flagship immigration policy was in disarray, a government spokesman said a pilot scheme which had been due to start this month had been cancelled.
"We have decided not to proceed," the spokesman said on Sunday, declining to explain why.
Under the plan, visitors from India, Pakistan, Bangladesh, Sri Lanka, Nigeria and Ghana seeking a six-month British visa would have been obliged to pay a refundable 3,000-pound ($4,800) cash bond to deter them from overstaying.
The government chose those countries because they were "high risk" sources of illegal immigration, it said.
Polls show that immigration is one of the most important issues for voters in Britain, where Cameron's Conservative party faces the threat of the UK Independence Party (UKIP) siphoning off support ahead of a parliamentary election in 2015.
Concerns have been fuelled recently by warnings in the right-leaning media about "hordes" of Romanians and Bulgarians moving to Britain next year, when European Union freedom of movement restrictions lapse at a time when Britons face rising competition for jobs.
UKIP, which campaigns for Britain to leave the EU and for a halt to "open door" immigration, made sweeping gains in local elections in May, winning almost one in four votes, mostly at the expense of the Conservatives.
Most opinion polls regularly give it a support base of around 10 percent of the electorate.
The U-turn on the visa bonds underlines deep policy rifts in the alliance between the Conservatives and their junior partner, the centre-left Liberal Democrats.
Liberal Democrat leader Nick Clegg initially said the bond plan was an idea worth exploring, but changed his mind after some in his party called it discriminatory.
Two weeks ago, the government said it was abandoning an idea for a nationwide advertising campaign urging illegal immigrants to "go home or face arrest". A pilot scheme in London had sparked accusations of racism from some politicians.
The government's decision to drop the plan also reflects tension between two of its core policies - immigration reform and expansion of trade and investment.
Cameron has pleased many voters by saying he has cut net annual immigration - the numerical difference between people coming in and out of the country - by a third since he came to power in 2010. He says he wants to get it down to the "tens of thousands" from the hundreds of thousands.
Yet he says he also wants Britain to dramatically expand trade and investment with countries such as India to help it compete in what he calls "the global race", which initiatives like the visa bond plan put at risk.
The scheme sparked public fury in India and talk of retaliatory measures.
Britain's opposition Labour party, which is ahead of the Conservatives in opinion polls, said Cameron was presiding over an immigration policy "in chaos".
"It seems David Cameron's government can't get anything right when it comes to dealing with illegal immigration," David Hanson, Labour's spokesman on the issue, said in a statement.
"Investors in India are now put off from investing in the UK whilst the Home Office (interior ministry) fail repeatedly to do anything about their failure at our borders to stop and return illegal immigrants."
The government maintains its push to curb immigration is still on track.
Planned changes to immigration laws would increase fines for employers who hire illegal immigrants, compel landlords to check their tenants' immigration status and make it difficult for illegal immigrants to open bank accounts or get driving licences.
(Editing by Sonya Hepinstall)