Sir Keir Starmer is set to unveil plans to drive down net migration and overhaul the "broken" system with plans to tighten tests for all visa applicants.
Under the new reforms, migrants who pay their taxes on times, volunteer in the community and work in the public sector or high-skilled jobs will be prioritised for residency rights.
The news comes in the wake of election gains of Nigel Farage's Reform UK by making it harder for migrants to secure citizenship in the UK.
Unveiling an immigration white paper along with Yvette Cooper, the home secretary, the prime minister will focus on low-skilled workers in a move that threatens the social care and university sectors.
The paper has been criticised by the head of the Confederation of British Industry who argued that businesses are not responsible for high net migration and foreign workers are needed to help ease labour shortages.
The CBI is concerned that further restrictions on student visas will put more pressure on university finances and add to the perception that hiring immigrants is a cheap route for employers to access labour.
It argues that it is more expensive and difficult to fill a vacancy through immigration than to hire locally or to train workers, and believes it is a mistake to focus work visas only on the brightest and the best, rather than having targeted visas to boost productivity and investment.
Rain Newton-Smith, chief executive of the CBI, said net migration targets were an “incredibly blunt tool” and international students should not be included. “If your focus is on how we drive growth in the UK, that doesn’t sit well alongside a net migration target,” she said.
“The danger is economic migration is being mixed up in debates around border security enforcement and illegal migration. That shouldn’t come at the cost of how welcoming we are to international students, to lab technicians, to some of the critical skills we need.”