Home Office aid spending 'wreaking havoc' on FCDO's development work

Rwanda scheme delay causing “untenable limbo”, watchdog adds
Harben House Hotel in Newport, a hotel allocated as temporary accommodation for asylum seekers in the UK in August 2023. Photo: Alice Mitchell/Alamy

By Tevye Markson

11 Apr 2024

Home Office spending on domestic refugee costs is continuing to “wreak havoc” on the FCDO's work overseas, the UK’s aid watchdog has warned, but has found communication between the departments on the issue is improving. 

The government is spending a significant chunk of its aid budget on domestic refugee costs, with the latest statistics, published by the Foreign, Commonwealth and Development Office yesterday, showing the amount of official development assistance spent on refugess in the UK rose from £3.7bn in 2022 to £4.3bn in 2023.

A report by the Independent Commission for Aid Impact, published concurrently with FCDO statistics, warns that the government’s overall response to its concerns raised in a report last year, which included recommendations to limit spend on refugee costs and improve oversight of spending, is “inadequate”.

The watchdog has also raised concern in the report that the Home Office’s illegal migration plans, and chiefly the Rwanda scheme, is creating an “untenable” state of limbo, both from a financial and humanitarian perspective.

But it finds “significant improvement from 2022”, including better cross-government communication on in-donor refugee costs and its impact on the rest of the UK official development assistance programme. 

‘Serious questions remain’ over ‘inefficient’ aid budget spend

The latest international development stats show there was a small decrease in the proportion of ODA spent on so-called "in-donor" refugee costs last year, taking up 28% of the aid budget in 2023 compared to 29% in 2022.

This was partly due to gross national income being higher than forecast and partly because of increased flexibility from the Treasury, which saw ODA spend rise from 0.51% of GNI to 0.58%, ICAI said.

The watchdog's report says the FCDO has coped better this year with the stresses created by in-donor  refugee costs due to this increased flexibility and improved cross-government communication. The FCDO has also strengthened its risk management and planning, while the Home Office has improved forecasting of its ODA spending.

But ICAI said "the underlying factors wreaking havoc on FCDO’s development partnerships and spending commitments in 2022 have not been tackled" and “serious questions remain” over both value for money and “alignment of this spending with the UK’s development objectives”

ICAI chief commissioner Dr Tamsyn Barton said: “We have long raised concerns that the way the government manages the aid spending target, cutting across the normal lines of accountability, can lead to poor value for money for taxpayers. Allowing the Home Office to spend an unlimited amount on hosting asylum seekers and refugees, with the costs falling to FCDO’s budget, sets the wrong incentives.

"What’s more, using so much of the aid budget on UK asylum hotels, rather than on supporting people nearer home, is inequitable and inefficient.”

Of the £4.3bn spent on refugees and asylum seekers in the UK, £2.9bn – more than two thirds – was spent by the Home Office, with most of this spent on hotel accommodation.

Despite the Home Office attempting to move away from hotel accommodation, there were nearly as many asylum seekers staying in hotels in December 2023 as there were a year before (more than 45,700 people), although the Home Office reported a drop in the first quarter of 2024. The per-person costs are fluctuating but have not reduced, while standards of support do not seem to have tangibly improved, ICAI found.

Sarah Champion, chair of parliament's International Development Committee, said ministers “are still not listening” to its concerns after the IDC urged the government last year to ringfence the UK’s aid budget for overseas spending amid the rising spend on hotel accommodation and other in-UK refugee costs.

"Almost 30% of our aid is being spent on UK refugee costs – nearly five times our bilateral spend on emergency international humanitarian aid. We do not believe that UK ODA is being spent in the spirit of the OECD rules,” Champion said.

She said the increase in ODA spend to 0.58% of GNI is “welcome but still far short” of the government's manifesto commitment to spend 0.7% of GNI on aid.

"We can see from the significant cuts in programming in Asia, as well as those to humanitarian assistance, that much more aid is needed internationally – there is little in these figures to celebrate,” Champion added.

Rwanda plan creating “untenable limbo”

ICAI said the Illegal Immigration Act and the Rwanda scheme could significantly reduce the proportion of aid used to support asylum seekers in the UK, but is currently causing an “untenable state of limbo” with “considerable” financial and humanitarian costs.

“The Illegal Immigration Act is an important unknown piece in this puzzle: how the act is implemented will have significant implications for the ODA eligibility of accommodation and support services for those arriving in the UK by irregular routes with the aim of seeking asylum,” it said.

"The act relies on the government’s ability to remove from the UK those arriving by irregular means. But this part of the act is not in force and there are continuing uncertainties about plans for removal at scale even if the government’s plan to send some asylum seekers to Rwanda were realised."

The ICAI said the Illegal Immigration Act has left the status of the more than 55,000 asylum seekers who have arrived since 20 July 2023 – plus those who arrived between March and July, when the act was making its way through parliament – "unclear", with the Home Office allowing them to enter the asylum-claims system but not progressing their applications.

“This limbo state is untenable both from a humanitarian perspective and from a financial one,” the watchdog said. “The new backlog of cases in limbo is building up fast, at considerable human and financial cost.”

A government spokesperson said: "The UK spent over £15 billion on development last year, including on life-saving humanitarian aid in Gaza, in Sudan following the coup, and in Türkiye and Syria after the earthquake. Our spend in 2023 also helped fragile states to access finance, millions of women globally to receive family planning support and is tackling the effects of climate change. We are also nearly doubling our spend in low-income countries this financial year.

“Last year’s budget was boosted by additional funding to support refugees in the UK, who have escaped oppression and conflict overseas, including from Ukraine and Afghanistan. We will continue to ensure our aid budget delivers value for money for British taxpayers.”

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