Billions of pounds of taxpayer money has been “wasted” on the “chaotic” asylum hotel system, with private firms making “excessive profits” from contracts plagued by mismanagement, a damning parliamentary report has found.
MPs have strongly criticised the Home Office for its “incompetence” when dealing with what the Home Affairs Committee branded a “failed, chaotic and expensive” system that has seen projected costs triple from £4.5 billion to £15.3 billion between 2019 and 2029.
The scathing parliamentary review concluded there was a “manifest failure” by the department to properly manage contracts with private firms tasked with housing asylum seekers, allowing companies to generate “excessive profits” whilst taxpayers footed spiralling bills.
Dame Karen Bradley, chairwoman of the Home Affairs Committee, delivered a withering assessment of the department’s performance in a report published on Monday that exposes years of financial mismanagement and poor planning.
Hotels Became Permanent Solution
The report revealed how asylum hotels, originally intended as temporary emergency accommodation, have instead become “a widespread and embedded part of the asylum accommodation system” due to the Home Office’s inability to develop long-term alternatives.
MPs condemned the department’s approach as a “series of hasty, short-term responses” driven by “shifting priorities and political pressure for quick results” rather than sustainable solutions. This reactive strategy has cost taxpayers billions in unnecessary expenditure whilst failing to address underlying problems.
The Home Office has undoubtedly been operating in an extremely challenging environment but its chaotic response has demonstrated that it has not been up to the challenge,” the report stated bluntly.
Community Impact Ignored
The committee described it as “inexplicable” that accommodation providers were not required to assess the potential impact on local communities before opening migrant hotels, a failure that caused significant damage across the country.
As a result, “some local services experienced unsustainable pressures” whilst community cohesion deteriorated as “misinformation and mistrust” were allowed to proliferate unchecked in areas suddenly hosting large numbers of asylum seekers.
Asylum Hotels became flashpoints for public anger over the summer, particularly in Epping where sustained protests erupted after an asylum seeker housed at The Bell Hotel was charged and subsequently jailed for sexual assault offences against local women.
MPs acknowledged that the majority of protests involved local residents with “genuine concerns” about the impact on their communities, though some demonstrations also attracted individuals from outside areas seeking to “promote divisive agendas or instigate disorder”.
Tens of Millions in Unclaimed Profits
The Government’s neglect of day-to-day contract management was highlighted as particularly egregious, with the report revealing that tens of millions of pounds in excess profits owed to the Home Office by accommodation providers remain unclaimed.
The committee insisted this money should be funding public services “not sitting in the bank accounts of private businesses” enriching themselves from the migrant crisis.
Furthermore, despite hotels accounting for over 75 per cent of spending on asylum accommodation, no performance penalties have been applied for poor standards at hotel facilities or the large accommodation sites at Napier Barracks and Wethersfield.
The average cost of housing someone in an asylum hotel stands at £144.98 per night compared to just £23.25 in dispersal accommodation such as houses of multiple occupation, yet the Home Office has failed to shift towards more cost-effective options.
Uneven Distribution
The report detailed how the Government’s haphazard approach has led to highly uneven distribution of asylum accommodation around Britain, often concentrated in areas already suffering high levels of deprivation.
Sixty per cent of asylum seekers living in hotels are located in southern England, with the value of the 10-year accommodation contract for this region soaring from £0.7 billion to £7 billion since 2019.
The Home Office was housing approximately 103,000 people as of June 2025, with 32,059 residing in hotels. Whilst this represents a decrease from peak levels, it remains higher than the previous year despite government pledges to reduce reliance on expensive hotel accommodation.
Safeguarding Failures
MPs expressed alarm at hearing “too many cases” of inadequate asylum accommodation and unaddressed safeguarding concerns for vulnerable people, including children wrongly placed in adult facilities due to faulty age assessments.
An inquest into the death of Colombian migrant Victor Hugo Pereira Vargas heard that senior Home Office officials responsible for asylum accommodation did not even know which staff were working at hotels under their contracts.
Freedom of information data revealed hundreds of complaints have been escalated to the three main accommodation providers, with 620 complaints reaching Serco in 2024, 592 to ClearSprings Ready Homes and 264 to Mears.
Government Response
Dame Bradley warned ministers against “making undeliverable promises to appeal to popular sentiment” such as pledging to end all hotel use by 2029 without having credible alternative accommodation plans in place.
While reducing hotel use is rightly a Government priority, there will always be a need for flexibility within the system, and the Home Office risks boxing itself in,” she said. “The Home Office must finally learn from its previous mistakes or it is doomed to repeat them.”
A Home Office spokesman defended the government’s record, stating: “The government is furious about the number of illegal migrants in this country and in hotels. That is why we will close every single asylum hotel, saving the taxpayer billions of pounds.”
“We have already taken action, closing hotels, slashing asylum costs by nearly £1 billion and exploring the use of military bases and disused properties.”
However, the committee warned that turning to large sites such as former military bases as alternative accommodation could prove more costly than hotels, whilst creating new problems for surrounding communities.
The report identifies break clauses in 2026 and contract expiration in 2029 as opportunities to “draw a line under the current failed, chaotic and expensive system” but only if the Home Office develops genuine long-term strategy rather than continuing its pattern of reactive crisis management.
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