The changes, which are likely to come into effect in June, were revealed by Lord Mackay of Clashfern as it emerged an armed robber had been granted legal aid to sue police officers who shot him during a Post Office van hold-up.
Steve Charalambous, who was jailed for five years in September 1993, is suing the Metropolitan Police Commissioner Sir Paul Condon for pounds 250,000 compensation. At his Old Bailey trial, Charalambous, 35, of Finsbury Park, north London, admitted conspiracy to rob and firearms offences after the February 1993 raid.
He was shot three times by police marksmen after he ignored calls to drop his gun, which proved to be an imitation weapon. In his writ, Charalambous says the police committed unlawful assault and trespass to the person and claims damages for "excruciating pain, fear, shock and lasting emotional distress".
A spokeswoman for the Lord Chancellor's department said she could not comment on an individual case, but anyone was eligible for legal aid if they met the criteria in their application. Under the changes, announced by Lord MacKay in a written answer to a Parliamentary Question yesterday, officials will also be allowed to take the value of property into account.
The Legal Aid Board has disregarded the applicant's home until now, but, under the new rules, it can take into the account the value of a property over pounds 100,000. A special investigations unit will be set up to investigate complex cases.
The measures to curb the entitlement of the wealthy follows the controversy sparked by aid granted to people such as Kevin and Ian Maxwell, Asil Nadir and Ernest Saunders. The reforms will cover both civil and criminal cases, although the main aim is to reduce the cost of civil cases, which consumed about two-thirds of this year's pounds 1.4bn legal aid budget.
Mike Bennett, chairman of the Metropolitan Police Federation, said the decision to grant Charalambous legal aid was an example of "a world gone mad".
"We have got a system in this country where the goodies are the baddies and the baddies are the goodies. I hope the Metropolitan Police vigorously defends this. All this is doing is putting money into lawyers' pockets," he said. "If this claim succeeds then I think a lot of my members will have to go back to the drawing board in terms of being officers and in terms of what they stand for."