The cost of asylum accommodation is expected to more than triple to £15.3bn over 10 years, the public spending watchdog has warned.
The National Audit Office (NAO) said around 110,000 people seeking asylum were housed by the Home Office in December 2024 – a rise of 134 per cent since 2019. Some 38,000 of these live in hotels.
Original estimates on the cost totalled £4.5bn for 2019-2029, but the NAO has now revised this up to £15.3bn.
In its report for the home affairs committee, the NAO said the rise was due to the surge in people arriving in the UK by crossing the English Channel and a rise in those previously detained under the Conservative government’s Illegal Migration Act 2023 now seeking asylum.
It said those temporarily living in hotels accounted for 35 per cent of all people in asylum accommodation in 2024-25, and for about 76 per cent of the annual cost of contracts – £1.3bn of an estimated £1.7bn.
So far this year, more than 11,500 people have arrived in the UK on a small boat – a record number for the first five months of the year since data was first collected in 2018.
There were also an estimated 66,000 people in other accommodation, usually houses or flats, in December last year, as well as 4,000 failed asylum seekers living in Home Office accommodation.
The Labour government is pivoting away from using large sites, such as old army bases, to house asylum seekers and towards medium-sized accommodation. The NAO report said that a former student accommodation block in Huddersfield is being developed for future use.
The Home Office also said that it receives up to 4,000 referrals about safeguarding incidents inside their accommodation every week, but does not analyse the data to find trends.
The findings come ahead of MPs preparing to question contractors Clearsprings Ready Homes, Serco and Mears about their role sourcing and managing asylum accommodation.
Reacting to the report, home affairs committee chair Dame Karen Bradley said: “Dealing with the cost of the asylum accommodation system remains a huge challenge for the government.
“The NAO report reveals that the cost of these contracts is likely to be over three times what was envisaged when they were drawn up.”
On questioning providers next Tuesday, Dame Karen added: “We want to see why costs have risen so dramatically, but will also be looking at the quality of support that is provided, and will be challenging providers on failures to meet key performance indicators in recent years.”
The NAO’s report also said data from suppliers “suggests that hotels may be more profitable than other forms of accommodation”, while profit margins for contractors average 7 per cent – which is within the Home Office’s original estimate of between 5-13 per cent.
The watchdog also reported that, as of 31 March, the Home Office has taken £4m off suppliers’ revenues for reported underperformance since 2019.
It comes as the Home Office ended the use of supplier Stay Belvedere Hotels (SBHL), subcontracted by Clearsprings, after its performance and behaviour “fell short” of expectations.
Announcing the move in March, Home Office minister Dame Angela Eagle had also told MPs a full audit was being conducted of the supply chain.
Since Labour came to power in July last year, 23 hotels have been closed while contracts were discontinued at three large sites, including the Bibby Stockholm barge.
Napier Barracks in Folkestone, Kent, is also due to close and be returned to the Ministry of Defence in September.
Responding to the NAO’s findings, a Home Office spokesperson said: “As this report shows we inherited an asylum system in chaos with tens of thousands stuck in a backlog, claims not being processed and disastrous contracts that were wasting millions in taxpayer money.
“We’ve taken immediate action to fix it – increasing asylum decision-making by 52 per cent and removing 24,000 people with no right to be here, meaning there are now fewer asylum hotels open than since the election.
“By restoring grip on the system and speeding up decision making we will end the use of hotels and are forecast to save the taxpayer £4bn by the end of 2026.”
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