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The UK will spend £2.1 billion on housing and welfare for asylum seekers this year and only “modest reductions” are expected in the future, according to an official watchdog. The shock figures come despite Prime Minister Sir Keir Starmer’s pledge to close asylum hotels and “smash” the criminal gangs smuggling migrants across the channel. Britain is also spending more on asylum seekers than similar countries, with the cost of support reaching £19,163 per person – compared to an average of just £4,600 for other major countries.

Home Office officials have little incentive to make efficiencies, because asylum support comes out of the UK aid budget, which is meant to cut poverty overseas, and not from Home Office funds. The warnings came from the Independent Commission for Aid Impact, which reports to the House of Commons. So far this year 3,457 cross-Channel migrants have arrived in the UK.

Highlighting funding for asylum seekers and refugees, known officially as in-donor refugee costs (IDRC), it said the funding system “has not encouraged long-term planning to secure improvements in value for money. There has, as a consequence, been serious and sustained criticism of the Home Office’s management of IDRC.”

A review in 2023 “found a range of poor procurement and contract management practices regarding large accommodation contracts,” the watchdog said.

Spending was £2.8 billion last year, and is expected to be £2.1 billion in the 2025-26 financial year. The watchdog said this was “still far above historical levels”. It warned: “The government projects only modest reductions in IDRC in the coming years, suggesting that IDRC will continue to absorb approximately one-fifth of the UK aid budget.”

Moving asylum seekers out of hotels is unlikely to cut costs, the watchdog said.

It warned: “The shift to ‘large sites’ (such as former military sites, barges and unused office buildings) could in fact cost more than the use of hotels.”

And the watchdog said Home Office officials had told it they focused “on meeting their statutory obligations to refugees and asylum seekers”, while the impact on the aid budget was “outside their control”. It said this confirmed the findings of a previous review “which noted that the Home Office was not required to finance the rising costs of hotel accommodation through reductions elsewhere in its budget”.

Aid charities have condemned the use of overseas development funding to pay for asylum support in the UK, and Britain now spends a fifth of its entire aid budget on housing migrants and asylum seekers. Sir Keir Starmer announced in February 2025 that aid spending would fall to 0.3% on gross domestic product (GDP), down from 0.5%, to pay for higher defence spending.

A Home Office spokesman said: “For too long, including under the previous government, Overseas Development Assistance has been used to fund asylum costs. This government is driving those costs down, saving nearly £1 billion in overall asylum costs last year.

“The Home Secretary has set out the most sweeping asylum reforms in a generation to restore order to the system. We’re cutting incentives for illegal migration and revoking the duty to provide asylum seeker support such as housing.

“This government will close every asylum hotel, with the hotel population already down nearly 20% in the last year and 45% from its peak under the previous government.”

Gideon Rabinowitz, Director of Policy and Advocacy at Bond, which represents aid organisations, said: “We are disappointed by the report’s warning that, in the event of an underspend on asylum support, the Home Office are not obligated to restore these diverted funds back to the UK aid budget – meaning money intended for overseas spend may be pocketed by the Home Office, rather than spent on vital humanitarian and development support.

“While supporting refugees and asylum seekers in the UK is essential, these costs should be budgeted separately, instead of using scarce funds from the UK aid budget. Every penny must count towards reducing poverty and supporting marginalised communities worldwide – including women and girls, people in conflict zones, and people with disabilities.”