The UK government has clawed back £74 million from private companies accused of making excessive profits from multi-billion-pound asylum accommodation contracts, a move that has reignited debate over the country’s approach to housing migrants and the stewardship of taxpayer funds. The Home Office, following a comprehensive review of contracts covering more than 200 hotels and other accommodations, confirmed the recovery of these funds, which had been earned in breach of profit thresholds set out in long-term agreements. Yet, critics argue that this sum is just a drop in the ocean compared to the vast sums spent annually on asylum accommodation.
According to figures reported by the BBC and corroborated by government statements, the total cost of providing accommodation for asylum seekers in the 2024/25 fiscal year stands at £2.1 billion—an average of £5.77 million every single day. The £74 million recouped represents just 3.5% of that annual spend, or, as Conservative Shadow Home Secretary Chris Philp pointedly observed, “these savings will disappear in just 12 days.”
The contracts in question, signed in 2019 with three major private providers, were designed to ensure long-term capacity for managing asylum accommodation across the UK. But as demand for emergency housing soared—driven in part by the ongoing Channel crisis—costs ballooned and the use of hotels as stopgap measures became the norm. At present, the Home Office is supporting around 103,000 migrants, with roughly 32,000 residing in hotels. The remainder are housed in dispersal accommodation and private flats.
The average cost of hotel accommodation is a staggering £144.98 per person per night, compared to just £23.25 for dispersal housing. This disparity has not gone unnoticed by Parliament. The Commons Home Affairs Select Committee, in a recent report, delivered a scathing assessment of the Home Office’s management of these contracts, stating the department had “squandered billions” and presided over a “failed, chaotic and expensive” system. The committee accused officials of a “manifest failure” to manage the deals, allowing private firms to reap excessive profits at the taxpayer’s expense.
Dame Karen Bradley, the Conservative chair of the Home Affairs Select Committee, welcomed the £74 million recovery but was quick to underscore its limitations. “This is only a small part of the many billions that the contracts have and will cost,” she said. “The government must now set out its long-term plan for delivering a resilient and cost-effective asylum accommodation system.” Her call for a comprehensive overhaul echoed the sentiments of many MPs, who have grown increasingly frustrated with the government’s handling of the issue.
Home Secretary Shabana Mahmood, who inherited the current system after Labour’s victory last year, acknowledged the problems but insisted that reforms are well underway. “This government inherited asylum hotel contracts that were not delivering good value for taxpayers’ money,” she said. “We have already saved £700 million in hotel costs. Now we are recouping millions more in excess profits. And by the end of this Parliament, we will have closed every asylum hotel.”
Mahmood’s promise to shutter all asylum hotels before the next general election is ambitious, but ministers have already made significant strides in reducing costs. The total annual spend on asylum accommodation has fallen from £3 billion in 2023/24—when the daily bill was as high as £8.3 million—to the current £2.1 billion. Much of this reduction is attributable to efforts such as room-sharing and the use of cheaper accommodation options. The Home Office is also exploring alternatives to hotels, including the use of military sites, in a bid to further reduce reliance on costly short-term solutions.
Despite these measures, the government faces criticism from all sides. The Home Affairs Committee has lambasted the Home Office for under-utilizing contractual mechanisms that could have limited excessive profits sooner. They also noted that some contracts include break clauses, which would allow ministers to terminate use of certain accommodations as early as 2026. However, critics say these options have not been fully exploited, leading to ongoing waste and inefficiency.
Public trust has also taken a hit. MPs have criticized the Home Office for failing to require providers to assess the impact on local communities before opening hotels, a decision that has placed unsustainable pressure on local services and fueled resentment in some areas. Many local authorities have struggled to cope with the sudden influx of asylum seekers, while residents have voiced concerns about the strain on schools, healthcare, and other essential services.
There is, of course, a political dimension to the debate. Conservative Shadow Home Secretary Chris Philp has been highly critical of Labour’s approach, claiming, “The truth is the Labour government is accommodating more illegal immigrants in hotels than at the election, and the first nine months of this year have been the worst in history for illegal immigrants crossing the Channel.” He argued that “only the Conservative Party has a serious, hard-edged plan to take control of our borders.”
Yet Labour ministers insist they are making progress where their predecessors failed. The Home Office points to the £700 million in hotel cost savings and the recent recovery of excess profits as evidence of a more disciplined approach. Home Secretary Mahmood told the BBC last week that “all options were on the table” as she studies the legal arrangements of existing contracts, suggesting that further reforms could be imminent.
Accommodation providers themselves have acknowledged their contractual obligations to return some profits to the government, but the scale of the sums involved—and the apparent ease with which profits exceeded agreed thresholds—has raised questions about the original terms of the contracts and the oversight mechanisms in place. The government’s review found that several suppliers had breached profit thresholds, triggering the recent clawback.
The road ahead is uncertain. With break clauses in some contracts allowing for possible termination in 2026, and with public and political pressure mounting, the government is under intense scrutiny to deliver on its promises. The challenge will be to create a system that is both fair to asylum seekers and cost-effective for taxpayers, all while maintaining public confidence and managing the complex realities of migration.
As the government moves to end the use of hotels for asylum accommodation and implement further reforms, the coming months will be a critical test of its ability to balance compassion, fiscal responsibility, and public trust in a system that has long been beset by controversy and inefficiency.
