Home Office spends a third of UK foreign aid budget 'without effective oversight'

Department's use of ODA budget on refugee and asylum seeker costs has caused major disruption to FCDO aid programme, watchdog says
Migrants rescued from the English Channel arriving at Dover. Photo: REUTERS/Henry Nicholls

By Tevye Markson

29 Mar 2023

The Home Office has spent a third of the UK’s foreign aid budget on refugee and asylum seeker costs without putting sufficient value for money checks in place,  the UK's aid watchog has found.

The department’s increasing appropriation of the official development assistance budget for accommodation costs has had a “severely negative impact across the UK aid programme”, according to a report by the Independent Commission for Aid Impact.

Following the release of the ICAI report this morning, the government confirmed plans to house migrants in military bases, and said it is considering also using ships to accommodate them.

Departments are able to spend an unlimited proportion of the aid budget on some of the first year costs of asylum seekers and refugees, including accommodation and other basic services. A growing proportion of the budget is being used for refugee costs due to a huge asylum processing backlog and a scarcity of accommodation to meet demand. 

Around £3.5bn of the ODA budget in 2022 was spent on refugee costs, approximately one third of the UK’s total aid spend that year, according to the watchdog. ICAI said this scale of refugee costs is a “highly inefficient response to global crises”. 

The FCDO, which is in charge of ensuring official development assistance spend does not go above 0.5% of gross national income, paused all “non-essential” overseas aid spending in July 2022 due to the rising and unpredictable Home Office takeover of the budget.

This suspension of most activity, which lasted four months, caused delay and a very limited humanitarian response in relation to emergencies such as the floods in Pakistan and the famine in Somalia, ICAI said.

The scale of the savings that the FCDO had to make was so large that it could not even ensure all activities it deemed as “critical”, such as those that are vital to protect against immediate threat to life and wellbeing, were continued, the report found.

The watchdog warned the the lack of limitation on spending for ayslum seeker and refugee costs  " creates little incentive for the Home Office and other departments to control their expenditure in this area", thus undermining incentives for longer term planning to reduce costs.

And it said this risk has been realised, with the Home Office “failing to effectively oversee” its major asylum accommodation and support contracts to ensure value for money.  While the department recently developed trackers to monitor and compare the cost effectiveness of different suppliers, ICAI said the key performance indicators being monitored are not appropriate for the task of ensuring that value for money is achieved.

The regulator has asked the government to consider introducing a cap on the proportion of the aid budget that can be spent on in-UK refugee costs, or introduce a floor to FCDO’s aid spending, “to avoid damage to the UK’s aid objectives and reputation”. 

It has also asked the Home Office specifically to strengthen its strategic and commercial management of asylum accommodation and support contracts to drive greater value for money. And it said speeding up processing times could help reduce emergency accommodation costs and lessen the disruption to the aid programme.

ICAI said the spend on refugee costs also did not contribute to any of the priorities set out in the UK government’s 2022 international development strategy.

MPs raised concerns in November that the Home Office has a "blank cheque" to use aid money for refugee spending. A month later, development minister Andrew Mitchell said the FCDO would set up a committee to scrutinise how other departments are spending aid money

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