The number of skilled workers allowed into the UK from outside the European Economic Area has been capped at 21,700.

Home Secretary Theresa May revealed details of the cap in a statement to MPs this afternoon.

Overall, the number of people allowed to come and work in the UK from outside the EU will be cut from around 196,000 to the “tens of thousands”, Mrs May explained.

The figure is a cut of 6,300 on the equivalent figure for 2009, and is much stricter than the cap of 43,700 recommended by migration advisors last week.

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So how will the cap work?

– It will not include employees transferred by their companies from another country if their salary is more than £40,000

– In the new year, ministers will produce proposals to reduce the number of family members who can join immigrants already living in the UK.

– The Home Secretary said the number of “tier one” people – highly skilled workers looking for a job, will be cut from 13,000 to 1,000

– The number of “tier two” workers – those who already have a job – will rise by 7,000

Mrs May said the system of trying to attract the brightest and the best had not worked.

“At least 30% of tier one migrants work in low-skilled occupations such as stacking shelves, driving taxis or working as security guards and some don’t have a job at all,” she said.

The announcement follows weeks of tense discussions between Tories and Lib Dems.

Immigration has long been a contentious issue, and one on which the two parties do not agree.

While the cap was a flagship Conservative policy during the general election, the Lib Dems opposed it, favouring instead better border control, entry and exit checks, and a Regional Points-Based Immigration System.

On their website, the Lib Dems say: “Our National Border Force would have the power of arrest. We would also introduce a Regional Points-Based Immigration System to ensure that immigration is targeted on areas that are under-populated and want more immigration, like Scotland.”

The Conservative government pledged to reduce immigration to the levels of the 1990s – tens of thousands a year, instead of the hundreds of thousands a year.

Clegg and Cameron battled over immigration during the televised leaders debates, and the issue remains controversial now.

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Earlier this month the Commons home affairs select committee said the proposed annual cap on immigration will cover fewer than 20% of long-term migrants to Britain. They said it will make little difference to overall immigration and may do serious damage to Britain’s knowledge economy.

There has been intense lobbying from businesses. The Confederation of Indian Business and some British financial leaders have also expressed concern that the cap would prevent entrepreneurs from coming to Britain.

However, Sir Andrew Green, of the Migration Watch think tank, said of the cap: “This is the first time in British history that any government has set a broad policy objective for net migration and we have to do that.”

Appearing on BBC Radio 4 Today programme, Green added: “We must reduce immigration – our population is heading for 70 million in 20 years, 68% of that, more than two-thirds, is down to immigration.”

Channel 4 News – Immigration Cap: how the numbers might add up