The Home Office is failing to collect more than £50million owed to taxpayers by firms making massive profits by providing hotels and accommodation for more than 32,000 asylum seekers. It could take until April 2026 for the money to be paid – even though businesses contracted to house migrants provided the Home Office with figures in Autumn 2024 and told officials they were ready to hand the cash over.
They owe the money thanks to clauses in their contracts which state they must pay back any profits above 5%. The Home Office launched an audit in the autumn to confirm how much should be repaid but says only that it hopes to receive the money before the next financial year begins.
Firms affected include Clearsprings Ready Homes, which says it owes the Home Office £32million, and Mears Group, which owes £13.8million. However, the businesses are sitting on the money until the audit is completed and they are asked to make the payment. The third firm, Serco, says its profit margins have not been high enough to require a repayment.
An investigation by the National Audit Office found the Home Office’s Asylum Accommodation and Support suppliers recorded profits of £383million between September 2019 and August 2024.
Chris Philp MP, Shadow Home Secretary, said: “Labour promised to end the use of asylum hotels but the number of asylum seekers being housed in them has gone up on their watch. And now we learn they can’t even collect £50 million that’s owed to the taxpayer. The money’s sitting there, the contracts are clear, but Labour are kicking it into the long grass.”
The delay in recovering cash is the latest blow for a Government which came to power with a pledge to “smash the gangs” behind the small boats crisis.
The latest official figures show more than 40,600 people have come to the UK via small boats since Labour came to power, with nearly 17,400 making the journey this year.
Reform UK deputy leader Richard Tice said: “The Labour Government’s failure to get a grip of the illegal migration crisis has enabled asylum accommodation barons to profit off the chaos, dumpings tens of thousands of undocumented men into communities whilst skirting their own financial responsibilities. Reform UK would put an end to asylum hotels and deport anyone that has arrived here illegally immediately.”
A Labour MP expressed frustration at ministers’ handling of this and other issues, saying the party arrived in Government without a plan.
He said: “I think unfortunately what has happened is you had a group of people who didn’t expect to get into Government and unexpectedly are in Government and that’s absolutely showing. Everything seems to be made up on the hoof.
“There seems to be no plan for anything. I don’t think any prep was done for government.
“That’s the only conclusion I can draw on the last 11 months.”
Alp Mehmet of Migration Watch was appalled by expenditure on accommodation, describing the costs as “jaw-dropping”. He said this showed how under the Conservatives and Labour the country had “failed to get a grip” and lost control of its borders.
Pushing for a change in approach from the Prime Minister and Home Secretary Yvette Cooper, he said: “Until Starmer and Cooper get real and abandon the silly notion of smashing the gangs, the crisis will only get worse.”
Conservative peer Lord Mackinlay said “low-grade hotels have become cash machines for their owners” as a result of a “flawed and ridiculous system”.
He added: “The Home Office’s desperation for rooms has meant even top quality hotels have been taken up, depriving local communities of usual venues for weddings and family events.”
In a submission to MPs, Mears Group said: “Mears have set out to the Home Office, how much we believe we are currently eligible to share and are awaiting final confirmation from the Home Office and for them to outline the process that will be followed to facilitate the payment,
“Mears has been extremely proactive through this process … we look forward to concluding the process and returning the agreed surplus to the Home Office.”
The delay was revealed by Immigration Minister Dame Angela Eagle, who said: “We are anticipating that monies from the profit share will be returned to the public purse this financial year.”
Home Office officials are searching for alternative accommodation for the 32,345 asylum seekers in hotel accommodation and are examining derelict tower blocks, old teacher training colleges and unused student accommodation. Each site will house between 200 and 700 asylum seekers, and the aim is to develop residential accommodation which could then be used to house British homeless families if asylum seeker numbers fall in the future.
Some of the sites could also be used by “multi-use” under Home Office plans. Further details have not been published but this suggests they could be used by local residents in some form as well as by asylum seekers,
The Government has so far received 198 expressions of interest from local authorities interested in providing premises.
Efforts by the former Conservative government to develop large sites such as former military bases or holiday camps have been abandoned, even though almost £80million had already been spent on this scheme.
The Home Office originally estimated that the total cost of asylum accommodation and support contracts would be £4.5billion over 10 years but the number of people seeking asylum has shot up and in 2024-25, the Home Office spent an estimated £1.7billion on the contracts. It currently expects to spend £15.3billion over 10 years.
Mr Philp highlighted Labour’s decision to scrap the previous Government’s Rwanda plan to remove asylum seekers to Rwanda. He said: “Labour tore up our deterrent, handed traffickers a free run, and turned Britain into a hotel booking service for illegal migrants. Worse still, Labour are slashing the Home Office budget in the middle of a border crisis, and hoping the hotels magically empty themselves of illegal immigrants.
“That’s why the Conservative Party introduced our Deportation Bill, which Labour voted against. This would restore control of our borders, bring sanity back to the asylum system, and remove every single illegal immigrant or foreign national offender.”
A Home Office spokesperson said: “We inherited an asylum system under exceptional pressure, and are urgently taking action to restore order and reduce costs, having already made asylum savings of half a billion.
“We are making strong strides to deliver a more sustainable and cost-effective asylum accommodation system. This includes ending the use of hotels, testing new locally-led models, and working closely with local authorities and other departments to ensure a fairer, more efficient approach.”