Rachel Reeves has pledged that the government will no longer house migrants in asylum hotels by 2029.
Outlining her spending review plans to MPs on Wednesday, Ms Reeves said that ministers would end “the costly use of hotels to house asylum seekers in this parliament”.
She said she was working with Home Secretary Yvette Cooper to end the costly scheme, which sees “billions of pounds of taxpayers’ money spent on housing asylum seekers in hotels, leaving people in limbo and shunting the cost of failure onto local communities”.
Ms Reeves told MPs that plans to cut the asylum backlog, hear more asylum appeal cases, and return people to their home countries would save £1bn per year.
Under spending plans published by the Treasury on Wednesday, officials estimated that they would still be spending £2.9bn on asylum costs in 2027-28 and £2.5bn in 2028-29. This year asylum costs are expected to be £3.9bn.
In Labour’s manifesto, the party pledged to end the use of asylum hotels and it has been looking at medium-sized sites, such as student accommodation blocks and former care homes, as alternative sources of accommodation.
The public spending watchdog recently predicted that the cost of asylum accommodation would triple to £15.3bn over 10 years. Original estimates on the cost totalled £4.5bn for 2019-2029, but the National Audit Office (NAO) revised this up to £15.3bn.
The NAO said that around 110,000 people seeking asylum were housed by the Home Office in December 2024 – with some 38,000 of these living in hotels.
The most senior civil servant in the Home Office said earlier this year that the department was aiming to get asylum hotel use down “to zero” by the end of this parliament. However, Sir Matthew Rycroft, who has now left the top job, predicted that “ups and downs” might affect that promise.
He said: “I do not think you should expect a gradual decline of that number down to zero neatly by the end of this parliament”.
Home Office minister Dame Angela Eagle has said that the department is currently exploring different ways of housing people. She told MPs on Tuesday that she had “clocked the break clauses” in the government’s big migrant hotel contracts, and that she was looking at other options via pilot schemes.
She added: “The idea with medium sites is things like old voided tower blocks, or old teaching training colleges or old student accommodation that isn’t being used, where you could have numbers of rooms that are more than you get with dispersed accommodation”.
Charities welcomed the pledge to end asylum hotels, with the British Red Cross calling the sites “hugely expensive” and “completely unsuitable for men, women and children who have endured unimaginable trauma”.
Enver Solomon, CEO of the Refugee Council, said: “Asylum hotels have become a flashpoint for community tensions and cost billions to the taxpayer, so ending their use is good for refugees, the taxpayer and communities. The deadline of 2029 feels far away, and we urge government to make it happen before then.”
He added that asylum seekers should be placed “within our communities not isolated in remote hotels”.
Steve Smith, CEO of Care4Calais, said the move was welcome but urged ministers to put an end to “the for-profit asylum accommodation model that has created billionaires”.
Labour has moved away from Conservative plans to use large sites, such as former military sites and the controversial Bibby Stockholm barge.
The Home Office is also prioritising the processing of asylum claims and issuing more decisions, meaning more people who are refused asylum are evicted from hotels.
Shadow chancellor Mel Stride responded to Ms Reeves’ review, saying: “The Home Office budget gets squandered on asylum costs because this government simply doesn’t have a plan on illegal migration.”
Former chief secretary to the treasury, Simon Clarke, said that the pledge to end hotel use could see asylum seekers moved into dispersal accommodation instead. He claimed this would “inevitably mean a major net transfer of them to the North and Midlands”.
