Asylum accommodation costs set to triple, says National Audit Office

Accommodation for asylum seekers will cost the taxpayer triple the amount the Home Office first claimed, according to new figures.

Contracts signed by the Conservative government in 2019 were expected to see £4.5bn of public cash paid to three companies over a 10-year period.

But a report by spending watchdog the National Audit Office (NAO) says that number is now expected to be £15.3bn.

The NAO says ministers have “few levers” to control the rising costs, which have largely been driven by an increase in the number of asylum seekers housed in hotels.

The average yearly cost of asylum accommodation is now expected to be higher than the amount ministers hope to save from cutting the winter fuel payment.

The NAO report, which was commissioned by Parliament’s Home Affairs Select Committee, says the number of asylum seekers in hotels increased from around 47,000 in December 2019 to 110,000 in December 2024.

Three quarters of all the money spent on asylum accommodation currently goes on hotels, despite them only accounting for around a third of all the asylum seekers being housed.

The NAO says that private providers who sign deals with the government may profit more from hotels than other types of accommodation.

In 2019, Conservative ministers signed seven regional contracts with three companies – Serco, Mears and Clearsprings – to help house asylum seekers.

The NAO says the three companies made a combined profit of £383m on asylum accommodation contracts between September 2019 and August 2024.

A large part of the extra costs is accounted for by Clearsprings’ contract in the south of England, which has risen from £0.7bn to an expected £7bn.

Clearsprings’ founder and director, Graham King, has previously donated to the Conservative Party, through other companies he has owned.

A Home Office spokesperson said the Labour government “inherited an asylum system in chaos” and criticised the Conservatives for signing “disastrous contracts that were wasting millions in taxpayer money”.

They said there were now fewer asylum hotels open than since the election and that measures taken were “forecast to save the taxpayer £4bn by the end of 2026”.

The Home Office has an optional break clause next year in the contracts with the three companies, but it’s understood these will not be triggered.

A senior Home Office source said the main driving force behind the rising accommodation costs was the increase in people crossing the channel on small boats.

They said the border has “slowly but surely been handed over to people smuggling gangs”, which meant the Conservative government had to quickly sign contracts that were “not in any state fit”.

The source said that ministers were in contact with Serco, Mears and Clearsprings “very regularly” and that the Labour government wants to “hold their feel to the fire”.

They refused to speculate on whether any of the three companies would likely be involved in asylum accommodation contracts after 2029.

Decisions taken by Boris Johnson’s government to stop processing many asylum claims are seen as a major driving force behind the initial increase in asylum seekers needing to be housed.

Rishi Sunak’s government began to process more of those asylum cases, but his claim to have cleared the backlog was rebuked by the UK’s statistics watchdog last year.

Home Office figures released in February showed the number of people claiming asylum in the UK had reached its highest level since records began in 1979.

The last Conservative government pledged to end the use of hotels to house asylum seekers in October 2023.

The overall number of hotels in use has since gone down, and Labour has also pledged to end them.

But last November a Home Office minister admitted that the number of hotels in use had started to increase again.