The Home Office has announced it will stop using the controversial Bibby Stockholm floating asylum hostel in January next year.
In a statement, the department said it had decided not to renew the contact for the barge – currently moored at Portland in Dorset – and that the move would save at least £20m next year.
The vessel, which has the capacity to house more than 500 people, was brought into use to provide accommodation for asylum seekers last summer, only to be evacuated a matter of days later when the legionella bacteria was discovered.
In December, an Albanian asylum seeker was found dead on the barge after reportedly having taken his own life.
Border security and asylum minister Dame Angela Eagle said the decision to stop using the Bibby Stockholm for its current purpose was part of wider efforts to save £7.7bn over the next decade by clearing the UK's asylum backlog.
"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," she said.
"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."
Fran Heathcote, general secretary of PCS – the civil service's biggest union – applauded the decision.
"We hope this will signal the end of an inhumane system that has been used to score political points, punishing asylum seekers rather than helping them," she said.
"We call on the government now to adopt our 'safe passage' policy that would create a safe and legal route for refugees to come to the UK and here begin their asylum claim.
"We also call on the government to give our members in the Home Office the resources needed to effectively handle claims. They want to work in a system that is humane and fair, and that offers dignity and respect for refugees and workers alike."