Significant optimism bias caused ‘woeful’ asylum accommodation estimate – Rycroft

Home Office perm sec admits department got its cost projections "so, so wrong"
Matthew Rycroft at the PAC session. Photo:

By Tevye Markson

16 Apr 2024

The Home Office’s estimated costs of new asylum accommodation at two former Ministry of Defence sites fell “woefully short” due to “very significant” optimism bias and a focus on procuring at pace, permanent secretary Sir Matthew Rycroft has said.

A National Audit Office report, published last month, found that the Home Office’s initial estimates for the set-up and refurbishment costs at ex-RAF bases Wethersfield and Scampton of £5m each were well off the mark, with the sites now projected to cost £49m and £27m respectively.

The Home Office now expects its large sites programme, which aims to replace hotel asylum accommodation with cheaper and more suitable alternatives, to cost more than the hotels they aim to replace.  

Appearing before the Public Accounts Committee yesterday, Rycroft was asked by MP Diana Johnson – who is also the chair of the Home Affairs Committee –  "how is it you could get the figures so, so wrong?".

Agreeing that the Home Office had got the figures "so, so wrong", Rycroft set out how and why this happened. 

“We were operating at pace – this is not an excuse, by the way, but just to set out the context of what was happening a year ago," he said. "There was a national emergency. There was a sense that we should be doing on this issue what our colleagues during Covid had done in terms of the pace of procurement and things like that. So we decided to press on as quickly as we could to increase the stock of total accommodation available to the UK government. And there wasn't other accommodation types available because all of the existing private rental market, even hotels, was already being used.”

He added: “And so we had to act in a novel and therefore in quite a creative way, looking at these sites. So we made an assessment about how much the setup cost would be, which in the case of both of those sites was woefully short. So there was a very significant optimism bias.”

Rycroft said there were also difficulties when the initial estimates were made in accessing the MoD-owned sites to carry out checks of gas, electrical and fire requirements, which played a part in the underestimations. Asked why the MoD wouldn’t give access, Rycroft said: “It turned out that we needed to get our own people in to look at those costs.”

When another MP suggested the MoD was "obviously not wanting to really provide you with much assistance at that time", Rycroft said: "I think there was a reasonable level of cooperation with MoD."

He added that the department was “making judgments, under pressure and the pace, but we went through a due process, which involved the Treasury approving it as well – so it wasn't just within the Home Office.”

Rycroft said the Home Office "should have foreseen" some of the additional costs but said it "would not have been possible" to foresee others. 

The Home Office's initial estimates of how many asylum seekers the sites would be able to accommodate also proved overly ambitious, with a total capacity of 3,700 predicted for the two sites. The current expectation is 1,600, with an additional surge capacity of 400 at Wethersfield.

Scampton and Wethersfield are part of the Home Office's Large Sites Accommodation Programme, which aims to house asylum seekers in "more cost-effective" and "more suitable" accommodation than hotels. The programme also includes the Bibby Stockholm barge.

Wethersfield opened in July 2023. As of January this year it was housing 576 adult males. Scampton is yet to open, with the Home Office still holding talks with the local council to reach an agreement on the use of the site.

The department now expects the large sites programme to cost £1.2bn and believes the sites will cost £46m more than using hotels, according to the NAO.

As of December 2023, there were more than 46,000 asylum seekers in hotels, costing £8m a day, according to Home Office figures.

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