Government efforts to cut foreign aid spent on asylum seekers stall

The government is struggling to cut the amount of money from the foreign aid budget it spends on asylum seekers in the UK, new figures show.

Home Office figures show the department expects to spend £2.2bn of overseas development assistance (ODA) this financial year, of which £2.1bn is expected to be spent on asylum support. The predictions for this year are only slightly less than the £2.4bn spent in 2024/25.

Official development assistance (ODA) – which was slashed earlier this year to 0.3 per cent of GDP to pay for a boost to defence spending – is used to promote the economic development and welfare in developing countries around the world.

A portion of this money is handed to the home office to support asylum seekers after they arrive in the UK, most of which goes towards their accommodation.

But the government’s failure to cut back on this spending has led aid organisations to accuse ministers of “robbing Peter to pay Paul”, claiming they are in danger of a “reckless repeat of decisions taken by the previous Conservative government.”

Figures published in March revealed that the number of asylum seekers housed in costly hotels has increased by more than 8,000 since the general election, with 38,079 migrants being housed in hotels at the end of December.

It comes despite Sir Keir Starmer previously saying a Labour government wouldn’t use the foreign aid budget to pay for asylum seekers’ hotel costs – but admitted that the government would not be able to stop doing so immediately.

“I’m not going to pretend to you we can do that in the first 24 hours”, he said in May 2024.

Meanwhile, Labour’s election manifesto vowed to “end asylum hotels, saving the taxpayer billions of pounds”.

Gideon Rabinowitz, director of policy at the Bond network of development organisations, warned that “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”, he told the BBC.

Meanwhile, Sarah Champion, chair of the International Development Committee, said: “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.

“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. 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.”

The Home Office told the BBC it is committed to ending asylum hotels and is speeding up asylum decisions to save taxpayers’ money.

The department also said it had reduced overall asylum support costs by half a billion pounds in the last financial year, saving £200m in ODA which had been passed back to the Treasury.

In April, The Independent revealed that the government had awarded a contract which allows for hotels and barges to house asylum seekers up until September 2027, despite Labour vowing to end the practice.

The contract, advertised ahead of the election, was awarded by the Cabinet Office in October 2024 – just months after Labour won a historic landslide election victory – and runs up until September 2027.

In June, the home secretary admitted she was “concerned about the level of money” being spent on asylum seekers’ accommodation, adding: “We need to end asylum hotels altogether.”

A Home Office spokesperson said: “We inherited an asylum system under exceptional pressure, and are urgently taking action to restore 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 £4 billion by 2026. The Rwanda Scheme also wasted £700m to remove just four volunteers – instead, we have surged removals to nearly 30,000 since the election, are giving law enforcement new counter-terror style powers, and increasing intelligence sharing through our Border Security Command to tackle the heart of the issue, vile people-smuggling gangs.”