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.

It also said it had reduced overall asylum support costs by half a billion pounds in the last financial year. This had saved £200 million in ODA which had been passed back to the Treasury.

The Home Office’s latest figures for foreign aid spending on asylum hotels were contained in a formal memorandum given to MPs on the Home Affairs Committee and published on its website on May 30.

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 from 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.

The BBC also understands the Home Office is working with the Greater Manchester combined authority on plans to increase the amount of dispersal accommodation available for asylum seekers, with the hope it would reduce the use of hotels.

The supply of dispersal accommodation – which is longer-term, temporary housing – has not kept pace with record levels of asylum applications.