UK aid funding for refugees in the UK

Review

This review finds that the ability of UK government 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. We made six recommendations to help the UK government improve the quality of aid spending on in-donor refugee costs and minimise the resulting disruption to UK aid.

• This document was updated on 19 June 2023 to add a reference (footnotes 21 and 37).

Findings

• Soaring and unpredictable in-donor refugee costs have had a severely negative impact on the UK’s aid budget.
• The rise in in-donor refugee costs led to dramatic reductions in the UK’s bilateral humanitarian aid, at a time of large-scale global displacement crises and humanitarian emergencies.
• In-donor refugee costs at this scale are a highly inefficient response to global crises, as it is an extremely expensive form of ODA, compared to supporting crisis-affected people in their place of origin or displaced within their own region.
• The UK’s management of in-donor refugee costs creates little incentive for departments spending this aid to control their expenditure.
• Cross-government oversight and cooperation to manage in-donor refugee costs are not transparent, and are inadequate for protecting the integrity of the UK aid budget.
• The UK’s method for calculating in-donor refugee costs seems to be within the rules, but does not follow the OECD-DAC guidelines on a conservative approach.
• The Home Office’s response to the UK’s asylum and refugee accommodation crisis has not gone beyond short-term fixes.
• The Home Office is not effectively tracking value for money achieved from its commercial suppliers. Key performance indicators for commercial suppliers are outdated and contract management is not to the standards set by government for contracts of this magnitude.
• There is a hierarchy among the UK’s many schemes and approaches to different groups of refugees and asylum seekers. The level of support received by refugees and asylum seekers depends on the schemes they fall under, not their needs, creating inequity in the provision of support, with no clear humanitarian rationale.
• There is considerable variation on the quality and level of services across regions and local authorities, and between different hotels in the same areas.
• Charities, community groups, hotel management and concerned individuals have often provided additional support to fill key gaps.
• The processes to ensure safeguarding within initial and bridging accommodation for asylum seekers and resettled refugees are inadequate.
• Home Office learning from previous scrutiny reports and recommendations on value for money of accommodation and support services has been limited and lacks transparency.

Recommendations

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.
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.
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.
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.
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.
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.

Update to the review

We relied on spending estimates provided by government departments when we conducted our rapid review, as the official figures for 2022 had not yet been compiled. We produced an update to complement our original review after the government published its provisional statistics for UK aid spend for 2022 and the OECD DAC published its preliminary data.

The aim of the update is to ensure that an accurate account of the relevant data on UK in-donor refugee costs is available in the public domain. It also complements the analysis in our rapid review by comparing UK spending in 2022 with that of other donors.