Home Office plans for asylum accommodation will cost more than hotels, report finds

An investigation has found that the government's plans for large-scale asylum accommodation will cost more than using hotels and the large sites are housing fewer people than planned.

The investigation was undertaken by the NAO in response to public and parliamentary concerns about the Home Office's plans for asylum accommodation, in particular, the plan to move away from using hotels and towards large-scale accommodation sites.

However, the Home Office's own analysis suggests that the total spend to accommodate asylum seekers on large sites will actually cost more than hotels. The Home Office expects its large sites programme to cost £1.2 billion and believes the sites will now cost £46 million more than using hotels.

Gareth Davies, Head of the NAO, said the Home Office has made progress in reducing the use of hotels, but that the pace at which the government pursued its plans led to increased risks.

“[The Home Office] continued this programme despite repeated external and internal assessments that it could not be delivered as planned. Its plan to reset the large sites programme makes sense, and the Home Office should reflect on lessons learned from establishing its large sites programme at speed and improve coordination with central and local government given wider housing pressures.”

By the end of March 2024, the Home Office expects to have spent at least £230 million developing four large sites – the Bibby Stockholm, the former RAF bases at Scampton and Wethersfield, and former student accommodation in Huddersfield. At the end of January 2024 they were only housing approximately 900 people.

The report notes: “The Home Office updated its value-for-money assessments in January 2024. The new assessments changed how long some sites would be used, and excluded 'sunk' costs of around £199 million, so the investment decision was focused on the additional spending that would be required. These assessments concluded that large sites would be around £153 million cheaper than hotels,” the NAO report said, adding: “However, the Home Office expects that, when the sunk costs are included, the sites will, in total, cost £46 million more than using hotels over the same period.”

“Most of the additional cost compared to hotels comes from using the Scampton site. The Home Office hopes that the large sites will bring other benefits over hotels, including that they will be more 'appropriate and sustainable'. But, to date, it has not included these benefits in its analysis. It told us that it expects to update its analysis of the value for money of sites quarterly, and plans to produce a full benefits strategy.”

The Home Office’s assessments of value for money are affected by its assumptions of how much it would cost to set up sites. The Home Office originally estimated set up costs at the former RAF bases would be £5 million each, but they increased to £49 million for Wethersfield and £27 million for Scampton.

So far, two of the four sites – Wethersfield and the Bibby Stockholm vessel – are accommodating people seeking asylum. These two sites were housing just under half the number of people the Home Office expected them to at the end of January. The Home Office is also considering reducing the maximum number of people it accommodates at the sites in Wethersfield and Scampton.

In addition, both the Home Office and the Infrastructure and Projects Authority (IPA) rated the plans to deliver accommodation on large-scale sites as being ‘high risk or undeliverable’.

The Infrastructure and Projects Authority has undertaken three reviews of the Home Office’s work on asylum accommodation since November 2022. All are red-rated; meaning ‘successful delivery of the programme to time, cost and quality appears to be unachievable’. The Home Office has also recognised the challenges to delivery, rating its own assessments of progress as red, and has repeatedly revised accommodation targets downwards.

"[The Home Office] lowered both its expectations on how many people its future sites will accommodate and its targets for the number of beds it will provide through these sites. It is now looking to make up to 2,500 beds available (but not necessarily occupied) by March 2024 and a total of 6,500 beds by December 2026 and it expects to find sites that will accommodate between 200 and 700 people in each, rather than more than 1,000 people," the report said.

Overly-ambitious accommodation timetables led to increased procurement risks, as the Home Office prioritised awarding contracts quickly, and modifying existing contracts over fully-competitive tenders. The Home Office used emergency planning regulations to enable it to start working on sites quickly and secured some large sites before communicating with the local stakeholders about its plans, to reduce the risk of local opposition affecting negotiations. In January 2024 the Home Office was still working with providers to develop specific measures assessing residents’ safety at large sites.

Responding to the report, Cllr Roger Gough, Asylum, Refugee and Migration spokesperson for the Local Government Association (LGA) said councils want to work with government on developing a better system but the circumstances require a national, regional and local approach to solving pressing housing needs across all schemes that welcome new arrivals to the UK.

“Councils need advance engagement on alternatives sites opened up for those leaving hotels, and for ongoing new arrivals, and an active role in deciding which hotels to close. These new sites need to open in areas that are not already facing unsustainable pressures due to asylum and resettlement and be in line with regionally agreed plans. Councils also need urgent confirmation of the funding available for their role in asylum, with current funding due to end this month.

“We are also keen to work with government on how to keep people safe and supported as well as ensure councils are properly prepared in advance of the expected increase of arrivals over the summer and to understand the potential impacts of the Illegal Migration Act.”