A fifth of the UK aid budget is spent on housing migrants in the UK, the aid watchdog has said in a report.
Using funds meant to help those overseas on those in the UK poses a ‘serious risk to value for money’, the Independent Commission for Aid Impact (ICAI) warned.
It said that in 2024, £2.8bn was spent on hosting migrants and asylum seekers – £1billion more than on humanitarian aid despite crises in Gaza and Sudan.
Aid spending is due to fall from 0.5 per cent of UK gross national income (GDP) to 0.3 per cent from 2027 with the saved money diverted to defence.
Foreign aid spending has long been dogged by allegations of fraud and waste and suggestions it has helped terror groups.
The report found that setting a figure for aid spending as a proportion of GDP and including asylum costs ‘undermined value for money’.
It warned that any rise in spending on the unpredictable cost of hosting migrants meant funding would automatically be taken from overseas spending.
It also said that the Home Office’s ability to charge an uncapped amount of spending on migrants had ‘not encouraged long-term planning to secure improvements in value for money.’
A fifth of the UK aid budget is spent on housing migrants in the UK, the aid watchdog has said
This means that the UK’s spending on housing migrants is ‘double or triple’ that of other comparable countries and the highest cost per head, it said.
In 2023, when spending on migrants peaked at 28per cent of the total aid budget, the report said that this represented a ‘perverse outcome’ for overseas aid.
It has called for the two to be separated due to the demand-driven nature of support for migrants.
Under international aid rules, some of the costs of hosting migrants in their first year in the UK can count towards aid spending, including accommodation, food, healthcare and children’s education.
But the report found that these costs have risen dramatically in recent years – mainly due to a steep rise in the costs per head of the support.
Increased arrivals of migrants – including Afghans following the Taliban resurgence and Ukrainians following Russia’s invasion – added to a backlog of undecided asylum claims, it said.
A shortage of accommodation has meant the Home Office has needed to house migrants in expensive rented hotels.
It said that based on Government figures in the 2025 Spending Review, it expects spending on migrants to continue to take a fifth of the aid budget.
This would mean that when foreign aid spending falls to 0.3per cent of GDP, this will mean just 0.24per cent will be spent on aid – the joint lowest figure in more than 50 years.
The UK has used aid spending to cover most of the cost of renting entire hotels, despite some rooms remaining empty.
The report found that nearly £50 million in aid went towards unoccupied hotel rooms in December 2023 alone, or £600 million for the year.
ICAI Commissioner Harold Freeman, who led the review, said: ‘As the aid budget shrinks and ministers have to make hard choices, independent scrutiny will be essential to ensure what remains of UK aid is delivering meaningful results for people who need it most.
‘It’s also clear that the current practice of combining UK asylum support costs with overseas development spending within a single budget is not logical or transparent.
‘Asylum costs serve a distinct purpose and are driven by domestic pressures, rather than the UK’s priorities overseas.
‘We recommend that treating these costs separately could help restore clarity and public confidence in how the UK uses its aid budget.’