Home Office asylum costs could no longer be counted as aid under Illegal Migration Act

6 Sep 2023

The Illegal Migration Act, if implemented in full, could mean that much of the Home Office’s current spending on support for asylum seekers in the UK would no longer be eligible to come from the aid budget overseen by the Foreign, Commonwealth and Development Office (FCDO), a new analysis finds today (Wednesday 6 September).

The Home Office is not yet using the powers of the Act, designed to stop those arriving via illegal routes such as small boats from remaining in the UK. Today’s Independent Commission for Aid Impact (ICAI) update examines the potential implications of the Act for whether the Home Office can report its costs for hosting arrivals as Official Development Assistance (ODA).

Under international rules, in the first year after arrival, some of the costs associated with supporting refugees and asylum seekers, such as housing and food, qualify as aid. This category of ODA is referred to as ‘in-donor refugee costs’. The OECD Development Assistance Committee (DAC), which governs the use of ODA, states that such aid must only be used for humanitarian purposes and not any form of coercion, such as detention or deportation.

If asylum seekers who arrive in the UK via irregular routes are deemed illegal and due for removal by the Act – and so are barred from receiving asylum in the country – they would not be eligible for ODA-funded accommodation and support, the report suggests.

As ICAI reported in March, because of the way the aid target is managed by the government, costs incurred by the Home Office currently end up being effectively paid by FCDO. The Illegal Migration Act, if implemented, puts this unsatisfactory arrangement in question.

ICAI Chief Commissioner, Dr Tamsyn Barton, said:

“Our analysis of the aid rules suggests that the Illegal Migration Act, if fully implemented, could close off the main source of funding the government is using to house asylum seekers. Whereas currently, the FCDO has to cut other aid programmes in order to meet these costs, they would have to be met by the Home Office out of its own budget.

“ICAI highlighted the value-for-money problems caused by the current arrangements in our earlier report, including inadequate management by the Home Office of its asylum contracts. And using so much of the aid budget on UK costs such as hotels, rather than supporting people in their home countries, is inequitable as well as inefficient.”

The Home Office spent around £2.4 billion of ODA in the UK in 2022, of which £1.86 billion went on hotel accommodation for asylum seekers and refugees. On 10 August the department told ICAI it had not used any powers under the Illegal Migration Act with regards to inadmissibility and detention, as the relevant powers have not yet commenced.

The DAC guidance advises countries to take a conservative approach when reporting in-donor refugee costs as aid, to avoid over-reporting, and protect limited ODA resources and the integrity of development assistance. ICAI concluded earlier this year that by contrast, the “UK’s interpretations on what to include are generous, and the use of modelling based on unit costs rather than reporting actual costs risks over-reporting”. The watchdog recommended the UK review its reporting, which the government rejected. Today’s update finds the government’s methodology has indeed not changed since then, although the first meeting of the new cross-government ODA Board in May, chaired by Ministers, discussed ODA eligible in-donor refugee costs.

The watchdog models three hypothetical scenarios of how the aid budget could be affected by the Illegal Migration Act in 2024, depending on the extent to which it is implemented and other factors such as the size of the asylum backlog, which at the end of June 2023 stood at more than 134,000 main applicants awaiting a decision.

These thought experiments are not predictive, due to key variables including how many asylum seekers and refugees will arrive and how the Act will be implemented, an area of considerable uncertainty. In the hypothetical examples, which use spending categories and figures from 2022 as their starting point, the amount of ODA spent by the Home Office on in-donor refugee costs would vary between as much as £1.8 billion and as little as £170 million depending on the extent to which the Act is implemented.

The scenarios also illustrate that aid spent on in-donor refugee costs continues to create enormous uncertainty, with FCDO unable to predict its budget, as ICAI highlighted in its earlier review.

That report found that total in-donor refugee costs had risen to around £3.7 billion in 2022, an estimated 29% of the UK’s total aid spend that year and double the average of other OECD donor countries. In the government’s response, it rejected ICAI’s recommendation to introduce a cap on the proportion of the aid budget that can be used in this way.