ICAI rapid review finds poor value for money in UK aid to refugees in the UK

29 Mar 2023

• ICAI rapid review examines UK aid spent on refugees and asylum-seekers in the UK, which it estimates to be around £3.5 billion in 2022, approximately one third of the UK’s total aid spend that year.
• ICAI finds that the ability of departments to spend an unlimited proportion of the aid budget on the first year costs of asylum seekers and refugees undermines incentives for longer term planning to reduce costs, risking poor value for money.
• Soaring costs resulting from the failure to tackle the processing backlog and competition for scarce accommodation have absorbed a growing proportion of the limited budget for aid, making it an inefficient way of providing humanitarian assistance.
• ICAI has found that the Home Office has not been effectively overseeing the major asylum accommodation and support contracts to ensure value for money.
• ICAI heard a lot of anecdotal evidence of safeguarding lapses, particularly for women and girls, who face significant risks of harassment and even gender-based violence while in hotel accommodation.
• ICAI makes six recommendations on how to improve the quality of aid spending on in-donor refugee costs and minimise the resulting disruption to UK aid.

 A rapid review published today, Wednesday 29 March, by the Independent Commission for Aid Impact (ICAI), examines the quality and value for money of UK aid to refugees in the UK, following up work done by other scrutiny bodies such as the Public Accounts Committee, the National Audit Office and the Independent Chief Inspector of Borders and Immigration. It also examines the impact of in-donor refugee costs on the overall UK aid programme.

Under international aid rules, the first year of some of the costs associated with supporting refugees and asylum seekers who arrive in a donor country qualifies as official development assistance (ODA). This category of aid is referred to as ‘in-donor refugee costs’.

ICAI estimates that core UK expenditure on in-donor refugee costs was around £3.5 billion in 2022, approximately one third of the UK’s total aid spend that year. The final official statistic may differ, following quality assurance.

In recent years, the Home Office has faced a critical shortage of accommodation for refugees and asylum seekers for a number of reasons: the large visa schemes established for Afghan and Ukrainian refugees, 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 around 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 were not changed for four years despite enormous changes in context.

The review expresses concern that the government’s approach to in-donor refugee costs creates little incentive for the Home Office and other departments to control their expenditure in this area.

While the asylum system is not within ICAI’s scrutiny remit, measures to speed up processing could help reduce emergency accommodation costs and thus lessen the disruption to the aid programme. The methods of estimating costs also risk over-reporting.

In 2022, the FCDO, as the department charged with ensuring that the aid commitment of 0.5% was not exceeded, had to pause all but essential aid and was unable to plan, without knowing how much money would be available. This meant, for example, that there was delay and very limited humanitarian response compared to prior years in relation to emergencies such as the floods in Pakistan and the famine in Somalia.

The review also notes that this represents a significant loss in the efficiency and equity of humanitarian aid. The review also expresses concern about evidence heard about safeguarding lapses, particularly for women and girls in hotels, and variable standards of services, particularly in relation to asylum-seekers.

ICAI’s chief commissioner, Dr Tamsyn Barton, who led the review, said:

“ICAI and several other scrutiny bodies have examined in-donor refugee spending over the last five years, and value for money concerns emerge as a consistent theme, along with urgent calls for the Home Office to resolve the accommodation crisis.

“We were informed in March 2022 by the Home Office that costs amounted to £120 per person per night (including catering and other services), compared to £18 for longer-term accommodation in houses and flats. Earlier this month, the Home Office provided a list of improvements they are currently making in managing the asylum contracts and sourcing accommodation; however, ICAI did not see evidence to verify this information or assess how these improvements are being implemented.

“Soaring in-donor refugee costs have caused major disruption to the UK aid programme, causing many major aid programmes to be put on hold. We found that this diversion has also led to a significant loss in the efficiency and equity of UK humanitarian aid, as in-donor refugee support is an expensive way to use aid compared to supporting crisis-affected people in their own country and region.”

ICAI makes six recommendations on how to improve the quality of aid spending on in-donor refugee costs and minimise the resulting disruption to UK aid.

Recommendation 1: The government should consider introducing a cap on the proportion of the aid budget that can be spent on in-donor refugee costs (as Sweden has proposed to do for 2023-24) or, alternatively, introduce a floor to FCDO’s aid spending, to avoid damage to the UK’s aid objectives and reputation.

Recommendation 2: The UK should revisit its methodology for reporting in-donor refugee costs, as Iceland did, with the aim of producing a more conservative approach to calculating and reporting costs.

Recommendation 3: The Home Office should strengthen its strategic and commercial management of the asylum accommodation and support contracts, both individually and as a group, to drive greater value for money.

Recommendation 4: The Home Office should consider resourcing activities by community-led organisations and charities as sub-contractors in the asylum accommodation and support contracts for dedicated activities to support newly arrived asylum seekers and refugees.

Recommendation 5: The government should ensure that ODA-funded in-donor refugee support is more informed by humanitarian standards, and in particular that gender equality and safeguarding principles are integral to all support services for refugees and asylum seekers.

Recommendation 6: The Home Office should strengthen its learning and be more deliberate, urgent and transparent in how it addresses findings and recommendations from scrutiny reports.