Thousands more Gurkha soldiers and their families will be given the right to settle in Britain under a new policy to be announced by the Home Office.

New settlement rights due to be announced could open the door to 36,000 Gurkhas who served in the British Army before 1997. Nepal is understood to be concerned that the loss of so many citizens and their army pensions could leave a huge hole in its economy.

The Home Office was forced to take action after a ruling from High Court judges in October that the Government needed to review its policy on whether Gurkhas who had served before 1997 could live in Britain.

Officials say that the forthcoming decision has such far-reaching consequences that concerns have been raised about the continuing recruitment of Gurkhas from Nepal.

Defence officials have warned the Home Office that if the right to live in Britain were extended to every Gurkha who has served in the British Army Nepal might scrap the 1947 agreement under which its young men have been recruited each year. Since the tripartite agreement was signed with Nepal and India, the Nepalese economy has relied on income coming into the country from Gurkhas serving with the British Army.

The Home Office has come up with certain criteria for settlement that will keep the numbers down without flouting the judgment of the High Court. One Whitehall source said: “We can still meet what the judges want while keeping the criteria as tight as possible. We have no idea at this stage how many will want to come to live in the UK and how many members of their family they will bring with them.”

The MoD denied a report last week that it wanted to scrap the Brigade of Gurkhas because of the potential multimillion-pound cost of paying out bigger pensions to the Nepalese veterans if granted settlement rights.

“We don’t want to scrap the brigade. Five hundred Gurkhas are serving in Afghanistan at the moment,” a defence source said.

Gurkhas are needed, not just for their professionalism, but to boost numbers in an Army that is nearly 4,000 soldiers short. The Gurkha veterans who will be covered by the new policy are those who served in Hong Kong before the handover to the Chinese in 1997. After that date new Gurkha recruits from Nepal were based in Britain.

The MoD’s argument in the High Court case was that Gurkhas serving in the former British colony up to 1997 had no expectation of living in Britain and returned home to Nepal after completing their term of service. Only Gurkhas with strong links to Britain could be considered for residency.

The judges accepted that 1997 was a reasonable cut-off date but insisted that the decision to deny Gurkhas who had served before 1997 the automatic right to live in Britain was discriminatory and illegal. They said that the Nepalese soldiers had displayed the same courage and commitment to Britain as those who had served after 1997.

Gurkhas have fought alongside British soldiers for nearly 200 years — 200,000 fought in the world wars and 45,000 have died in action.

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