What assumptions underlie the Home Office’s £11 billion projection for asylum costs by 2026 and which have been criticised?
Executive summary
The Home Office’s oft-cited projection that asylum accommodation could cost about £11 billion a year by 2026 rests on a small set of measurable assumptions — chiefly the number of people receiving asylum support and the per‑night cost of that accommodation — and on modeling produced in mid‑2023 and cited in parliamentary briefings [1]. Critics from Parliament, independent analysts and charities argue those assumptions have been optimistic, opaque or inconsistent with observed spending patterns [2] [3] [4], and that long‑term reliance on hotels has already blown predicted costs far beyond early forecasts [5] [6].
1. What the £11bn figure actually assumes: occupancy, unit costs and timing
The figure appears to be derived from an impact assessment approach that multiplies projected numbers of people receiving asylum support by assumed per‑night accommodation costs and then annualises that total into a 2026 estimate, as summarised in parliamentary research briefings [1]. That modelling therefore implicitly assumes a trajectory for arrivals and caseloads, a stable or known mix of accommodation types (hotels, dispersed housing, military sites), and expected unit costs per person per night — variables that are highly sensitive to operational decisions on use of hotels and contract management [1] [5].
2. Why MPs and watchdogs say the assumptions understate real costs
The Home Affairs Committee and subsequent reporting have highlighted that hotels, originally intended as a short‑term contingency, became an embedded, high‑cost solution and thus increased contract costs “by billions” beyond original forecasts [5] [4]. MPs conclude the Home Office submitted initial budgets it “knew to be insufficient,” expecting in‑year top‑ups — a practice that masked true cost pressures and made prior projections unreliable [2]. Independent fiscal analysts at the Institute for Fiscal Studies show the department’s planned asylum spending in recent years was far lower than outturns, suggesting baseline assumptions used for multi‑year projections were systematically too optimistic [3].
3. Contract design and provider behaviour that feed into the projection
The projection depends on the structure and pricing of the Asylum Accommodation and Support Contracts (AASC) that began in 2019; those contracts, according to parliamentary inquiry, include features that have limited the Home Office’s control over delivery and costs, while allowing expensive hotel usage to proliferate [5] [4]. MPs have criticised “flawed contracts” and “incompetent delivery,” and note the contracts contain break clauses exercisable from March 2026 that could materially change future cost trajectories if used [7] [5].
4. Policy changes and additional measures that complicate the arithmetic
New policy proposals — such as systematic status reviews, or scrapped deterrence schemes like Rwanda — also alter cost forecasts: charity analysis warns that review regimes could add over £1bn across a decade [8], while government removal or deterrence policies are cited by ministers as ways to reduce longer‑term bills but have uncertain immediate savings [9] [10]. National Audit Office and Treasury material indicate some reforms are expected to cut at least £1bn annually, but those estimates sit alongside large uncertainties about caseload and local authority costs not always captured in Home Office figures [11].
5. The critique: opacity, optimistic baselines and failure to account for hotel dependency
Critics converge on three themes: lack of transparency about the specific inputs behind headline projections, a history of “woeful budgeting” where starting budgets were unrealistically low and later topped up, and failure to factor in the scale and cost of long‑term hotel use that has already driven spending well above earlier forecasts [12] [2] [5]. Parliamentary reports and media coverage detail how expected accommodation costs have effectively tripled from earlier estimates, a finding used to argue assumptions underpinning the £11bn projection are either out of date or understate likely outturns [6] [13].
6. The other side: ministerial claims and the 2026 inflection point
The Home Office and some ministers argue that decisive action — closing hotels, using break clauses and processing or removing people more quickly — can materially lower future costs and thereby validate lower projections; official responses pledge savings and point to planned reforms as justification for reduced forecasts [10] [14]. Parliamentary scrutiny, independent fiscal analysis and charity calculations however treat those policy savings as contingent and often uncertain, meaning the £11bn figure depends heavily on reforms being delivered on time and at scale [11] [3].
Conclusion: a conditional projection that critics say is too fragile to be a firm fiscal baseline
The £11bn projection is transparent in form — occupancies times unit costs — but fragile in practice because the Home Office’s historical under‑budgeting, embedded hotel use, contractual constraints and policy uncertainties make the inputs volatile; MPs, the IFS and charities therefore criticise it as optimistic, insufficiently evidenced and sensitive to operational failings that have already driven spending much higher [2] [3] [5]. Where documentation is absent in the available reporting, this account does not assert hidden assumptions beyond those explicitly noted in parliamentary and analytical sources.