A plan to overcome the £500m pensions deficit that is proving a massive hurdle to the sale of Tata’s UK steel business is set to fail, according to a leading pensions expert.

Changes the Government is reported to be considering "drive a coach and horses through a fundamental principle” of pension schemes, according to John Ralfe, who is also advising a government inquiry into BHS, the Pension Protection Fund and the Pensions Regulator.

Mr Ralfe has sounded the alarm over reports the Government wants to change the way the £14.7bn Tata pension scheme’s accrual rate is measured, by linking it to the consumer price index instead of the faster rising retail price index (RPI), cutting its liabilities by £2.5bn.

According to reports, Tata would also kick in several hundred million pounds to help the process, allowing it to wash its hands of the business, which has generated losses of up to £1m a day.