“Woeful budgeting” by the Home Office has led to years of overspend on asylum, a watchdog has claimed.
For the past three years, the department has set £110m aside for asylum operations. But a new report from the Institute for Fiscal Studies (IFS) said the actual spend had averaged £2.6bn a year in that time.
Research economist for the watchdog Max Warner said going over budget was “entirely understandable” when there was “a one-off unexpected spike in costs or demand”.
But, he added: “When it is happening year after year, something is going wrong with the budgeting process.”
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The IFS accused the Home Office of getting into the “bad habit” of submitting its initial budgets to parliament at the start of the year knowing full well the funds wouldn’t cover what was needed, instead relying on additional money from the Treasury’s reserve fund – a top-up that last year amounted to an extra £4bn.
And it claimed the new government was making the same mistakes again, saying it was submitting figures it “knows to be insufficient”, and was already writing in a Treasury top-up of £1.5bn – with another of £4bn judged by the watchdog to be “all but inevitable”.
The IFS put the budgeting issues at the heart of the disagreement between former Tory chancellor Jeremy Hunt and his Labour successor Rachel Reeves shortly after she took office.
Ms Reeves accused Mr Hunt of lying over the state of the UK’s finances, saying there was a £22bn “black hole” in funding – including the need to spend £6.4bn on asylum and illegal migration in 2024/25.
He rejected that claim, saying it contradicted the budgets he had presented to parliament and that were signed off by civil servants, and insisting the figures were there to see before she became chancellor.
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‘Hunt lied over state of public finances’
The watchdog said both politicians had a point, but only because the Home Office and the Treasury were continuing “poor budgeting practice” that “leaves a lot to be desired”.
It said Ms Reeves was right to point out the lack of budgeting for asylum pressures by the previous government – though she “perhaps overstates the extent to which this was unforeseeable and unexpected”.
And while Mr Hunt had a right to question the budget estimates presented to parliament by Labour and if they were enough, it was the same case when he was chancellor the previous year.
Responding to the report, a Labour spokesperson reiterated their attack on the previous Tory administration, saying they had “covered up the true extent of the crisis and its spending implications, leaving behind an unforgivable inheritance with nothing to show for it except record high small boat crossings in the first half of the year”.
The spokesperson added: “Every time the Conservatives faced a difficult problem, they failed to be honest. They knowingly overspent on departmental budgets, covered it up, called an election and ran away from the problem, leaving a £22bn black hole in the country’s finances for Labour to clean up.
“The Labour government has already begun the difficult work to clean up this mess and deliver an asylum system that is controlled, managed, and works for Britain.”
Shadow home secretary James Cleverly said: “Border control has never been free.
“By scrapping our deterrent on day one of a Labour government, the asylum bill will soar for taxpayers under Keir Starmer’s government.
“The government must urgently come forward with a plan to stop illegal boat crossings and end the use of expensive hotels to manage down costs within the asylum system.”
The report comes amid growing speculation around tax rises when Ms Reeves delivers her first budget on 30 October.
Speaking on Tuesday, Prime Minister Sir Keir Starmer warned of “painful” decisions to come in order to “fix the foundations” of the UK economy.
It is not yet clear where the axe may fall, but speaking to reporters on Wednesday, the chancellor refused to rule out rises to inheritance or capital gains taxes.