The only terrorist to escape alive when the Special Air Services stormed the Iranian Embassy in London 28 years ago, will be freed from jail within days – and then will live the rest of his life drawing welfare benefits from the British taxpayer.

Fowzi Badavi Nejad was told he had been granted parole on Tuesday – and assured he will not be deported back to his native Iran because of human rights laws.

Instead he will receive hundreds of pounds every week in free housing and benefits. He will be able to claim the full range of benefits, including free housing, council tax benefit and job seeker’s allowance. The bill is likely to be more than £1,000 a month.

Trevor Lock, the policeman held hostage in the siege, told a newspaper that he had written to the Government objecting to Nejad’s release, but this had been ignored. “He shouldn’t be allowed to stay in this country,” he said. “He will be living off the UK taxpayers.”

The move also risks causing a diplomatic row with Iran, which has demanded the 50-year-old’s return so that he can face trial for the murder of two hostages during the siege. This would lead to an inevitable death sentence. The threat of capital punishment is why his lawyers have been able to argue that he must stay in Britain.

He and five other terrorists forced their way into the Iranian Embassy in Kensington in April 1980, taking 26 hostages. The gang was demanding independence for a part of Iran and the release of comrades.

The SAS were ordered in after the terrorists murdered a hostage six days into the siege. A second hostage was killed by the terrorists as the SAS smashed through the windows in an operation witnessed live on TV around the world.

Nejad was sentenced at the Old Bailey in 1981 to life imprisonment for conspiracy to murder, false imprisonment, possession of a firearm and two charges of manslaughter.

He became eligible for parole three years ago and, after being initially refused, his application was approved last week. He will not be granted asylum, but will instead receive ‘leave to remain’.

Mr Lock, 68, who tackled the leader of the terrorists while the SAS stormed in, said his home had been fitted with CCTV and an alarm by the Government, presumably in preparation for the release.