Government struggles to cut foreign aid spent on asylum hotels

The government is struggling to cut the amount of foreign aid it spends on hotel bills for asylum seekers in the UK, the BBC has learnt.

New figures released quietly by ministers in recent days show the Home Office plans to spend £2.2bn of overseas development assistance (ODA) this financial year – that is only marginally less than the £2.3bn it spent in 2024/25.

The money is largely used to cover the accommodation costs of thousands of asylum seekers who have recently arrived in the UK.

The Home Office said it was committed to ending asylum hotels and was speeding up asylum decisions to save taxpayers’ money.

The figures were published on the Home Office website with no accompanying notification to media.

Foreign aid is supposed to be spent alleviating poverty by providing humanitarian and development assistance overseas.

But under international rules, governments can spend some of their foreign aid budgets at home to support asylum seekers during the first year after their arrival.

According to the most recent Home Office figures, there are about 32,000 asylum seekers in hotels in the UK.

Labour promised in its manifesto to “end asylum hotels, saving the taxpayer billions of pounds”.

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

But a report by spending watchdog the National Audit Office (NAO) in May said that number was expected to be £15.3bn.

On June 3, Home Secretary Yvette Cooper told the Home Affairs Committee she was “concerned about the level of money” being spent on asylum seekers’ accommodation and added: “We need to end asylum hotels altogether.”

The Home Office said it was trying to bear down on the numbers by reducing the time asylum seekers can appeal against decisions. It is also planning to introduce tighter financial eligibility checks to ensure only those without means are housed.

But Whitehall officials and international charities have said the Home Office has no incentive to reduce ODA spending because the money does not come out of its budgets.

The scale of government aid spending on asylum hotels has meant huge cuts in UK support for humanitarian and development priorities across the world.

Those cuts have been exacerbated by the government’s reductions to the overall ODA budget. In February, Sir Keir Starmer said he would cut aid spending from 0.5% of gross national income to 0.3% by 2027 – a fall in absolute terms of about £14bn to some £9bn.

Such was the scale of aid spending on asylum hotels in recent years that the previous Conservative government gave the Foreign Office an extra £2bn to shore up its humanitarian commitments overseas. But Labour has refused to match that commitment.

Gideon Rabinowitz, director of policy at the Bond network of development organisations, said: “Cutting the UK aid budget while using it to prop up Home Office costs is a reckless repeat of decisions taken by the previous Conservative government.

“Diverting £2.2bn of UK aid to cover asylum accommodation in the UK is unsustainable, poor value for money, and comes at the expense of vital development and humanitarian programmes tackling the root causes of poverty, conflict and displacement.

“It is essential that we support refugees and asylum seekers in the UK, but the government should not be robbing Peter to pay Paul.”

Sarah Champion, chair of the International Development Committee, said the government was introducing “savage cuts” to its ODA spending, risking the UK’s development priorities and international reputation, while “Home Office raids on the aid budget” had barely reduced.

“Aid is meant to help the poorest and most vulnerable across the world: to alleviate poverty, improve life chances and reduce the risk of conflict,” she said. “Allowing the Home Office to spend it in the UK makes this task even harder.”

“The government must get a grip on spending aid in the UK,” she said. “The Spending Review needs to finally draw a line under this perverse use of taxpayer money designed to keep everyone safe and prosperous in their own homes, not funding inappropriate, expensive accommodation here.”

Shadow home secretary Chris Philp said: “Labour promised in their manifesto to end the use of asylum hotels for illegal immigrants. But the truth is there are now thousands more illegal migrants being housed in hotels under Labour.

“Now these documents reveal that Labour are using foreign aid to pay for asylum hotel accommodation – yet another promise broken.”

A Home Office spokesperson said: “We inherited an asylum system under exceptional pressure, and continue to take action, restoring order, and reduce costs. This will ultimately reduce the amount of Official Development Assistance spent to support asylum seekers and refugees in the UK.

“We are immediately speeding up decisions and increasing returns so that we can end the use of hotels and save the taxpayer £4bn by 2026.”