Shabana Mahmood is said to have abandoned plans to house asylum seekers at a Scottish army barracks.
The Government previously planned to move 300 illegal migrants to the military base in the Scottish Highlands as Labour battles to get a grip on Britain’s spiralling migrant crisis.
However, Cameron Barracks in Inverness will now not feature in the highly controversial plans, according to The i Paper.
It was set to begin operations in early December, with plans to use the site for 12 months.
Resistance from the Scottish National Party (SNP) is understood to be a main reason for the change as well as legal objections.
The Home Office will plough on with the mass relocation of asylum seekers elsewhere in the country.
Labour have pledged to close all migrant hotels by the end of this parliament in 2029.
Currently, 12 are in operation in Scotland, housing more than 670 people.
Shabana Mahmood is said to have abandoned plans to house asylum seekers at a Scottish army barracks
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Highland Council, run by a coalition of SNP and independent councillors, objected because the site does not have a House in Multiple Occupation (HMO) licence.
In a further blow to Ms Mahmood’s plans, High Court judges ruled in May that forcing torture victims to share rooms was unlawful.
A Government source told the paper: “The Cameron Barracks will not be progressed.
“The SNP would rather have asylum hotels costing millions a year, rather than moving illegal migrants into more basic accommodation like military sites.”
The Government previously planned to move 300 illegal migrants to the military base in the Scottish Highlands
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The Home Secretary will announce new military sites later this week.
New figures show that using the barracks costs more than using asylum hotels.
Home Office officials have now said it cost taxpayers £7.1million through its first four months, meaning the cost of housing an asylum seeker at the military base was £160 per night.
The average cost of housing migrants in hotels is £144 per night.
Cameron Barracks in Inverness will now not feature in the highly controversial plans, according to The I Paper
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Labour MP Chris Murray, who leads scrutiny of asylum accommodation, has urged Shabana Mahmood to rip up the 10-year contracts signed with the firms responsible for housing migrants.
Mr Murray has said the Home Office should replace existing agreements with an incentive-based model where local authorities are paid to build housing stock.
The money would then be used to convert houses of multiple occupancy (HMOs) to be used by asylum seekers, while new homes would be built for current locals.
Contract costs for asylum seeker housing have tripled to more than £15billion, largely caused by an increased use of hotels.