A third of the UK’s overseas aid budget was spent by the Home Office on housing refugees in a poorly managed programme that contained few cost-saving incentives, the government’s independent watchdog on aid has found.
In a bid to control soaring costs, Independent Commission for Aid Impact (ICAI) recommends introducing a cap on the proportion of the aid budget that can be spent on in-donor refugee costs.
Spending on refugees in the UK from the overseas aid budget was £3.5bn in 2022, the review estimates, adding such a soaring and large UK spend had inevitably caused major disruption to the overseas aid programme.
The watchdog also says it has found worrying evidence that refugees are being mistreated at some of the accommodation.
Under UK law, the Home Office is entitled to access the UK overseas aid budget to cover the first-year costs of refugees.
Previous reports, including by the overseas aid select committee, suggested the aid budget was being heavily diverted, but this is the first time the ICAI has set out an authoritative figure or analysed the lack of detailed oversight by the Home Office on the soaring costs of housing refugees.
The report says the Foreign Office “lacking an accurate forecast from the Home Office of the sharply rising ODA (official development assistance) spend on in-donor refugee costs was forced to put its own programming on hold, despite the risk to its partnerships and the many people around the world who rely on UK development and humanitarian aid”.
The report finds the Home Office has faced a critical shortage of accommodation for refugees and asylum seekers due to the large visa schemes established for refugees from Afghanistan and Ukrainian, increasing numbers of asylum seekers crossing the Channel, and a growing backlog in asylum claims processing. This has resulted in the Home Office using 386 hotels around the UK to host refugees and asylum seekers as of March 2023, up from about 200 in October 2022.
ICAI assessed how the high-value private contracts engaged by the Home Office to provide accommodation and services for asylum seekers were managed and “found that the department did not effectively oversee the value for money of these services”. The review found the key performance indicators being monitored had not been changed for four years despite enormous changes in context.
The lack of controls has meant the Foreign Office slicing back its humanitarian budget, resulting in delay and a “very limited humanitarian response compared to prior years in relation to emergencies such as the floods in Pakistan and the famine in Somalia”.
ICAI was told in March 2022 by the Home Office that costs amounted to £120 a person each night (including catering and other services), compared with £18 for longer-term accommodation in houses and flats. ICAI found the officials charged with managing the contracts have not had the appropriate level of commercial experience for contracts of this value.
A UK government spokesperson said: “The government has acted decisively and compassionately to support the people of Ukraine and Afghanistan to escape oppression and conflict and find refuge in the UK and at the autumn statement we provided an additional £2.5bn in ODA to help meet the increased costs of this support.
“We report all ODA spending in line with the OECD’s rules – which allow funding to be spent on food, shelter and education for asylum seekers and refugees for their first year in the UK.
“The UK government spent more than £11bn in aid in 2021 and remains one of the largest global aid donors, helping tackle deadly diseases and getting millions of girls into school.”
