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Refugees would have to live on the remote site while their claims were processed with the number of successful applications capped at 20,000 a year.
The policy was pitched as a bold attempt to deter illegal immigrants with no case for asylum from travelling to Britain in the first place, helping to cut the £1.8 billion a year spent on the system.
However, it soon emerged that Oliver Letwin, Shadow Home Secretary and author of the plan, had no idea where the “faraway” place would be.
An earlier policy proposal to house asylum applicants in islands off Britain, including the Hebrides and Isle of Wight had to be abandoned after an outcry from local MPs. That forced the Conservatives to look farther afield.
Party officials said that contenders included remote British territories, such as Gibraltar or the Falklands, or part of a foreign country used with the Government’s permission.
Labour said that made it unlikely that any money would be saved under the scheme.
The Shadow Home Secretary said that his proposals would run contrary to the new EU constitution, which passes responsibility for asylum policy to Brussels. But critics said it would almost certainly breach existing international human rights obligations which compel governments to accept people fleeing persecution and treat them humanely.
Asylum promises to be one of the central issues at the next general election, with Tony Blair alarmed that the public does not believe that he has got to grips with the problem.
The new Tory proposals go well beyond Labour’s drive for accommodation centres in rural locations to house asylums-seekers while their claims are processed.
They even go further than those set out by the hardline former Shadow Home Secretary Ann Widdecombe who wanted all refugees detained while claims were processed.
However, there was some surprise at the Tory party conference that Mr Letwin, a social liberal whose own grandfather was a refugee from Eastern Europe who left for a new life in America, was behind the plan.
Mr Letwin has praised the changes to the asylum system by the Conservative Government in Australia which has forced applicants on to the Pacific island of Nauru.
Mr Blunkett has attempted to curb the flow of illegal entrants into Britain by stopping welfare benefits, stepping up security at ports and striking a deal with France to shut the Sangatte camp, near Calais.
Applications for asylum have fallen sharply, but the problem of illegal immigrants arriving clandestinely in Britain is seen as a bigger problem.
Mr Blunkett has said that the only way to successfully tackle the problem of unregistered illegal immigrants is to introduce national identity cards. He admitted recently that he has no idea how many illegal immigrants there are living in Britain and so cannot tackle the problem.
He is battling to get a Bill introducing ID cards into the Queen’s Speech in November, but his proposals have run into trouble in a Cabinet committee studying the details.
Last refuge
The demise of the British Empire has left few island possessions over which Whitehall has any influence (Richard Ford writes).
However, a select few exist that fit Oliver Letwin’s description of being far away — the Falkland Islands, Gibraltar, the Cayman Islands, Turks and Caicos Islands, St Helena, the Pitcairn Islands, Diego Garcia and Bermuda.
But while the Foreign and Commonwealth Office looks after the islands’ defence and foreign affairs, erecting camps would need to be agreed with local authorities.
If he is forced to search closer to home, Mr Letwin could look at the Channel Islands, the Orkneys, Isle of Man or the Isle of Sheppey.

Sam Coates's blog about Westminster, politics and spin
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