The government has clawed back £74m from private firms accused of making “excessive profits” from multi-billion dollar asylum accommodation contracts – a figure that represents a tiny fraction of the £2.1bn annual cost to taxpayers.
The Home Office confirmed it had clawed back the funds following a review of contracts for more than 200 hotels housing around 32,000 asylum seekers in the UK. The investigation found that several providers had exceeded the break-even points agreed under their long-term contracts to provide accommodation for migrants.
However, the sum refunded is just 3.5% of the department’s total asylum accommodation spending for 2024/25, averaging £5.77 million a day, sparking renewed criticism from MPs who accuse ministers of losing control of costs and contracts.
In a damning assessment, the House of Commons Home Affairs Select Committee said the Home Office had wasted “billions” on migrant hotels and presided over a “failed, chaotic and expensive” system. The report said there was an “apparent failure” in the management of contracts with private companies, which allowed them to make excessive profits from the canal crisis.
The committee’s Conservative chairwoman, Dame Karen Bradley, welcomed the £74 million recovery but described it as “just a first step”.
“This is only a small part of the many billions that the contracts have and will cost,” she said. “The government must now set out its long-term plan for delivering a resilient and cost-effective asylum accommodation system.”
MPs also criticized the Home Office for not requiring providers to assess the impact on the local community before opening hotels. They said the decision had placed unsustainable pressure on local services and damaged public trust.
The Interior Ministry is currently supporting 103,000 migrants at taxpayer expense, including in hotels, dormitories and private apartments. Average hotel accommodation costs £144.98 per person per night, compared to just £23.25 for dispersed accommodation.
While costs have fallen from £3bn in 2023/24 to £2.1bn this year – partly through the use of cheaper accommodation and room-sharing – MPs say billions have already been lost to poor oversight.
Interior Minister Shabana Mahmood said the government had “taken on asylum hotel contracts that did not provide good value for taxpayers’ money” but stressed that reforms were underway.
“We have already saved £700 million in hotel costs. Now we are recouping millions more in excess profits. And by the end of this Parliament we will have closed all asylum hotels,” she said.
Ten-year contracts signed with three private providers in 2019 were intended to give the government long-term capacity to manage asylum accommodation across the UK. But after years of rising demand and emergency use of hotels, ministers are now under renewed pressure to overhaul the system – and MPs are warning that without deep reforms, taxpayers will continue to foot an “unsustainable” bill.
