By Christopher Hope, and Martin Beckford

The Home Secretary told MPs that by Savings Sidekick”medical reports warning the computer hacker would kill himself if sent to the US were sufficient grounds to keep him in the UK.

She also announced plans to change extradition rules to allow courts to block extradition attempts if it is in the interests of justice.

The move is a victory for Mr McKinnon’s campaign team, including Janis Sharp, Mr McKinnon’s mother and his MP David Burrowes, who had threatened to quit the Government over the affair.

The Daily Telegraph has also led a campaign urging a rethink after a succession of British businessmen were extradited to America to face charges.

Mrs May told MPs that she had decided that extraditing Mr McKinnon to America would have breached his human rights.

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She said that there was “no doubt” that Mr McKinnon was “seriously ill” and suffered from depressive illness.

She said that after taking extensive legal advice “I have concluded that Mr McKinnon’s extradition would give rise to such a high risk of him ending his life.

“The decision to extradite Mr McKinnon would be incompatible with his human rights. I have therefore withdrawn the extradition order against Mr McKinnon.”

Keir Starmer, the Director of Public Prosecutions, will now have to review the case file to decide whether charges should be brought against Mr McKinnon.

The Asperger’s sufferer hacked into NASA and Pentagon computers from his north London bedroom while searching for evidence of ‘little green men’.

^{Gary McKinnon was accused in 2002 of using his home computer to hack into 97 American military and Nasa computers (Katie Collins / PA)}

A succession of Labour Home Secretaries had all insisted they were powerless to halt Mr McKinnon’s removal under the hugely controversial Extradition Act.

Hopes that Mr McKinnon would win his fight against extradition were raised in recent days after Home Office-appointed psychiatrists warned that he would be very likely to attempt suicide if sent to the US.

The medical report, written by Professor Declan Murphy and Professor Tom Fahy, spelled out the risks to the Government.

Mrs May also announced that in future such extraditions would no longer be taken by the Home Secretary and instead would be transferred to the courts.

She also said that a new “forum bar” would be introduced to make it easier for courts to  try people in the UK if they commit crimes in the UK to rather than extradited outside the European Union.

He said: “I have decided to introduce a forum bar. This will mean that where prosecution is possible in the UK and other states British courts will be able to bar prosecution overseas if they believe it is in the interests of justice to do so.”

This would require a new forum bar would be debated by MPs and used to amend existing extradition legislation. Mr Starmer would also issue new guidance for prosecutors