The Ministry of Justice said it had asked the Civil Procedure Rule Committee, a body responsible for setting rules on legal costs, to “urgently look” at the rules governing the costs of holiday claims and “reduce cash incentives” in order to make it financially less attractive for claims management companies to encourage

travellers to lodge fake claims.

The MoJ said “a major barrier” to tackling the surge in fake claims – which Abta believes has increased by 500% since 2013 - was due to the vast majority of cases taking place overseas.

There is currently a loophole allowing claims management companies to levy unlimited legal costs for claims occurring abroad, leaving tour operators to pay widely inflated legal costs in proportion to the damages awarded in the case.

Under the new proposals, operators would pay a prescribed sum depending on the value of the claim, making the cost of defending a claim far easier to predict and manage.

In a statement the MoJ said: “As a result of these proposed changes, fixed recoverable costs can be extended to cover claims arising abroad, closing the loophole and meaning that pay-outs for tour operators will be subject to stricter controls.”

Justice Secretary David Lidington said: “Our message to those who make false holiday sickness claims is clear – your actions are damaging and will not be tolerated.

“We are addressing this issue, and will continue to explore further steps we can take. This government is absolutely determined to tackle the compensation culture which has penalised the honest majority for too long.”

The move is a major victory in the fight against fake illness claims and comes on the back of the Abta launching its Stop Sickness Scams campaign calling for the government to stop uncapped legal fees for overseas cases – a problem it branded a “lucrative loophole”.

The association said it "strongly welcomed" the news, adding: "It is crucial that the government looks at further reforms to increase transparency between claims firms and solicitors and we will continue to work with them to find long term solutions to the [fake sickness claims] problem."

Speaking to TTG last month, Abta chief executive Mark Tanzer said: “[Fake sickness claims are] damaging both financially for the trade and for the reputation of British travellers overseas. There are hoteliers now who are wary of taking Brits and that means prices could increase and choice will be restricted.”