The government has clawed back £74 million from private firms accused of making “excessive profits” under multi-billion-pound asylum accommodation contracts — a figure that amounts to a tiny fraction of the £2.1 billion annual cost to taxpayers.
The Home Office confirmed it had recovered the funds following a review into contracts covering more than 200 hotels housing around 32,000 asylum seekers across the UK. The investigation found several suppliers had breached profit thresholds agreed under their long-term deals to provide accommodation for migrants.
However, the sum recovered is just 3.5% of the department’s total asylum accommodation spend for 2024/25, which averages £5.77 million per day, fuelling renewed criticism from MPs who accuse ministers of losing control of costs and contracts.
In a damning assessment, the Commons Home Affairs Select Committee said the Home Office had “squandered billions” on migrant hotels and presided over a “failed, chaotic and expensive” system. The report said there had been a “manifest failure” to manage contracts with private companies, allowing them to make excessive profits from the Channel crisis.
The committee’s Conservative chair, Dame Karen Bradley, welcomed the recovery of £74 million but described it as “only a first step”.
“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.”
MPs also criticised the Home Office for failing to require providers to assess the impact on local communities before opening hotels, saying the decision had placed unsustainable pressure on local services and damaged public trust.
The Home Office is currently supporting 103,000 migrants at the taxpayer’s expense, including those in hotels, dispersal accommodation and private flats. Average hotel accommodation costs £144.98 per person per night, compared with just £23.25 for dispersal housing.
While costs have fallen from £3 billion in 2023/24 to £2.1 billion this year — partly through the use of cheaper accommodation and room-sharing — MPs say billions have already been lost to poor oversight.
Home Secretary Shabana Mahmood said the government had inherited “asylum hotel contracts that were not delivering good value for taxpayers’ money” but stressed that reforms were under way.
“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,” she said.
The 10-year contracts, signed in 2019 with three private providers, were designed to give the government long-term capacity to manage asylum accommodation across the UK. But after years of spiralling demand and emergency hotel use, ministers are now facing renewed pressure to overhaul the system — with MPs warning that, without deeper reform, taxpayers will continue footing an “unsustainable” bill.