Migrant hotels and accommodation will cost £15 billion over 10 years, the spending watchdog has revealed.
Taxpayers will shell out £4,191,780 a day on housing asylum seekers over the life of the 10-year contracts awarded to Serco, Clearsprings Ready Homes and Mears Group in 2019.
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 National Audit Office (NAO) published a briefing into the Home Office’s contracts for housing asylum seekers on Wednesday to support an inquiry into the issue by the Commons’ Home Affairs Committee.
The Home Office had predicted asylum accommodation contracts would cost £4.5bn between 2019 and 2029.
But they are now set to cost taxpayers a staggering £15.3 billion, the National Audit Office said.
The watchdog said: “The Home Office’s total spend on asylum accommodation is more than planned and it has few levers to control costs.”
It added that the number of people seeking asylum housed in Home Office accommodation rose by 134% between December 2019 and 2024, from 47,000 to 110,000.
So far this year, more than 11,500 people have arrived in the UK after crossing the English Channel, a record number for the first five months of the year since data was first collected in 2018.
The report also detailed that those temporarily living in hotels accounted for 35% of all people in asylum accommodation, and for about 76% of the annual cost of contracts – £1.3 billion of an estimated £1.7 billion in 2024-25.
Some 110,000 asylum seekers were living in taxpayer-funded accommodation, the watchdog revealed.
Around 42,000 were in Home Office ‘contingency accommodation’, including 38,000 in hotels.
The National Audit Office admitted asylum hotels “may be more profitable” for companies holding the contracts than other types of housing.
They are responsible for finding a range of self-catering accommodation for asylum seekers who are dispersed across the country, and for sub-contracting hotels for tens of thousands of migrants coming across the Channel by small boat.
The findings come ahead of MPs preparing to question contractors Clearsprings Ready Homes, Serco and Mears about their role sourcing and managing asylum accommodation next Tuesday.
Reacting to the report, Home Affairs Committee chairwoman 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, 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% – which is within the Home Office’s original estimate of between 5-13%.
The watchdog the Home Office has taken just £4 million 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 the Labour Government came to power in July last year, 23 hotels have been closed while contracts were discontinued at three large sites, such as 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% 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 £4 billion by the end of 2026.”