Billions of pounds wasted by Home Office on asylum hotels, MPs say

Billions of pounds are being wasted by the Home Office on asylum hotels, a committee of MPs say.

A damning report by the Home Affairs Committee says the expected cost of housing asylum seekers has tripled from £4.5bn to £15.3bn.

This follows a "dramatic increase" in demand following the COVID pandemic and rising numbers of those arriving by small boat.

The report, referring to accommodation contracts for 2019-2029, criticises the Home Office for failing to reclaim excess profits from asylum accommodation providers totalling tens of millions of pounds owed to the department.

The government has promised to end the housing of asylum seekers in hotels by 2029, amid mounting pressure over costs and a backlash in local communities.

Sir Keir Starmer blamed the Conservatives, saying Labour "inherited a huge mess in relation to pretty well all departments in government, and that includes the Home Office".

He said his government is processing asylum claims "much more quickly" than under the Tories and they are removing people "who have no right to be in our country" at a "higher rate than the best part of a decade".

Communities Secretary Steve Reed told Sky News the government was "working at pace to fix the problems we inherited", including expanding the number of caseworkers examining asylum cases.

"The Home Secretary... has been involved in conversations about how you can look at using disused military bases, for instance, instead of hotels, to accommodate people far more cheaply.

"But it takes time to get your hands on those sites, construct the accommodation and then move people into it. But we've already saved £1 billion. So it's starting to go down."

The report said that, without a clear plan for alternative accommodation, the government risks "under-delivery and consequently undermining public trust still further".

It added that the Home Office repeatedly cut corners in its "chaotic" response to pressures.

Committee chair Dame Karen Bradley called for the government to "get a grip" on the system "in order to bring costs down" and learn from its mistakes, or it is "doomed to repeat them".

She added: "The Home Office has not proved able to develop a long-term strategy for the delivery of asylum accommodation. It has instead focused on short-term, reactive responses."

Speaking to Sky News, she said the Home Office "isn't fit for purpose" should be split up, with one department for crime and one for policing, as the two areas "require different skill sets".

However the prime minister's official spokesman said there was no plans to do that.

The committee's report also noted the Home Office failed to engage with communities and local residents who have "genuine concerns" over asylum hotels in their area, as well as people travelling from other areas "to promote divisive agendas or instigate disorder".

MPs have pressed for the Home Office to prioritise closing hotels where there have been "significant community cohesion issues" - including in Epping, Essex, where demonstrations outside the Bell Hotel were held after migrant Hadush Kebatu was charged and later jailed for sexual assault.

The report said: "The Home Office has undoubtedly been operating in an extremely challenging environment, but its chaotic response has demonstrated that it has not been up to the challenge.

"The 2026 break clause and end of the contracts in 2029 represent opportunities to draw a line under the current failed, chaotic and expensive system and move to a model that is more effective and offers value for money.

"The lack of engagement and transparency has left space for misinformation and mistrust to grow, which in too many areas has led to tensions and undermined the ability of local partners to promote social cohesion."

It also said the government has mismanaged contracts handed to hotels used to house asylum seekers. This includes a lack of fines for hotels that have poor performance and not claiming tens of millions of pounds in excess profits.

Read more:
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The committee has instead called for a future accommodation system to be based on fairness rather than cost alone, to improve communication with local communities and be flexible to meet unpredictable demands.

A Home Office spokesperson said: "The government is furious about the number of illegal migrants in this country and in hotels.

"That is why we will close every single asylum hotel - saving the taxpayer billions of pounds.

"We have already taken action - closing hotels, slashing asylum costs by nearly £1bn and exploring the use of military bases and disused properties."

One of the hotels mentioned in the report, Mears, said: "Profit margins are contractually agreed at a level which demonstrates value for money for the taxpayer for the services provided and risks managed by Mears. Mears operating margin on the contract of 5%-6% is in line with or below typical margins on large public sector service contracts. The contracts include clauses for payments to be reconciled over time and for profits above a tendered contractual level to be shared back to the Home Office. We work on an open book basis with the Home Office and following an independent audit, Mears has made appropriate and agreed payments back to the Home Office."

On hotel use, they added: "Mears has reduced hotel use by half as we work towards ending the use of hotels."

Serco, which also provides hotels, said: "Serco wants to see an end to the use of hotels and agree with both the Government and Select Committee that this should be a priority. Since 2023, we have exited half of the hotels we operated.

"We have viable solutions to end hotel use and continue to work with the Home Office to deliver a long-term strategy which delivers for taxpayers."

(c) Sky News 2025: Billions of pounds wasted by Home Office on asylum hotels, MPs say