Asylum and refugee costs could devour third of UK aid budget

Britain is spending vastly more of its aid budget on asylum seekers than our international counterparts and this must stop, leading organisations have warned. Chancellor Rachel Reeves has been urged to end the Home Office’s “free ride” on the UK’s slashed aid budget.

This country spends 2.5 times more of its aid budget on each asylum seeker than any other G7 nation, a total of £4.2billion in 2023, according to a hard-hitting report from the IPPR think tank and the Centre for Global Development.

It warns that more than a third of Britain’s future “foreign aid” cash could end up covering asylum and refugee costs and pushes for the Treasury to impose a “steadily tightening” cap on the amount the Home Office spends.

The report says the “very high spend has not led to better results for asylum seekers” and “much of the cost is on very expensive contracts for poor quality hotel accommodation”.

The authors estimate the cost per asylum seeker to the overseas development budget has spiralled from £8,000 in 2018 to £54,000 last year.

The call comes days after Sir announced a cut in the foreign aid budget from 0.5% to 0.3% of national income by 2027. This is so defence spending can be boosted to 2.5% of GDP by 2027.

Former International Development Secretary Sir Andrew Mitchell said: “Under the the Chancellor of the Exchequer gave us £2.5billion to soften these costs but Labour ministers are not only unwilling to do what their Tory predecessors have done but have made the position incomparably worse. Make no mistake – as a result of this decision children in desperate circumstances will starve to death and basic medical services will be withdrawn .”

The Government is warned today that raiding the foreign aid budget to support asylum seekers in the UK makes the country look “deeply dishonest”. There are concerns spending that so much money intended for international development at home will “damage the UK’s standing, reduce its impact and influence around the world, and also make the UK an unreliable partner”.

Ian Mitchell of the Centre for Global Development, said: “The last Government created a system where one department can drain another’s budget – undermining basic principles of good public financial management. That has led to the UK spending 2.5 times as much as any other G7 country on each asylum-seeker it supports.

“Even if the number of arrivals fall, bringing costs down by £1billion, over a third of the UK’s aid budget will still be spent on British soil. Labelling this domestic spending as ‘international aid’ makes the UK look deeply dishonest at a time when international credibility is critical.

“Now that the Government has slashed aid, it must fix this broken system. A cap on how much the Home Office can take from the aid budget, per asylum-seeker would be a simple step toward better value for taxpayers and a more effective aid budget.”

The researchers estimate the defence spending decision will result in the total aid budget falling by “around £6.1billion by 2027”.

Laura Chappell of the IPPR associate said the current system means the Foreign, Commonwealth and Development Office “pays for basically any asylum support-related costs” in year one that “the Home Office can identify, giving them a free ride with reduced incentives to bear down on costs”.

Insisting “this must change,” she said: “The current approach now risks fatally undermining the UK’s international objectives…

“The Government can do better, and this is the moment to do so. A cap on how much can be spent per head on asylum from the foreign aid budget would be a simple first step to delivering better value for everyone’s money.”

Enver Solomon, chief executive of the Refugee Council said: “The best way to cut costs is to clear the backlog of asylum applications resulting in men, women and children stuck in hotels, trapped in limbo and unable to work. The use of hotels in communities across the country has become a damaging symbol of government failure and a flashpoint for community tensions.

“Billions are being wasted on appallingly-run contracts with private companies that cream off vast profits. There needs to be a serious plan quickly set out by Government to trigger the contract break clauses due next year and radically reform the system.”

A Treasury spokesperson said: “We are working to restore order to our broken asylum system through our plan for change. Thanks to the measures taken to reduce the asylum backlog and work towards exiting costly asylum hotels in this Parliament, we expect overall [foreign aid] asylum spending in 2024 to be lower than in 2023.”