The growing power of police informers, many of them hardened criminals, has led to a ban on secret backhanders and a clampdown on soft jail terms in exchange for information.
In future, "grasses" must pay tax on their fees which previously went undeclared and agree to their names being placed a special register.
The clampdown follows a government investigation into the relationship between the police and informers, who have in the past included such gangland figures as Kenneth Noye, the road-rage murderer of Stephen Cameron. Noye had a long career as an informer and collected large sums for pointing police in the direction of villains many of whom were rivals he simply wanted out of the way.
Another gangland figure to benefit from the informer system was Curtis Warren, whose criminal empire was so vast that he was dubbed "Target One" by Interpol. However, a case against him was dropped because his co-accused, Brian Charrington, was a valuable police informer.
Warren is now in jail but only after making an estimated £180m from drug dealing.
Customs routinely pay up to £1,000 per kilo of heroin or cocaine recovered and payments of £250,000 or more are relatively common to informers. This is considered a worthwhile investment in return for the number of man hours saved on investigations.
The practice of early release for prisoners who have informed on criminal gangs, under special pardon known as the Royal Prerogative of Mercy, is to be curbed. It is thought that many informers take advantage of such deals to commit fresh crimes.