© National Audit Office 2025

The Home Office’s asylum accommodation contracts

A briefing by the National Audit Office

Session 2024-25
7 May 2025
HC 874

The National Audit Office (NAO) scrutinises public spending for Parliament and is independent of government and the civil service. We help Parliament hold government to account and we use our insights to help people who manage and govern public bodies improve public services.

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This factual briefing has been prepared for the Home Affairs Committee as part of its inquiry into the delivery of asylum accommodation.

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Report by the Comptroller and Auditor General

Ordered by the House of Commons
to be printed on 6 May 2025

This report has been prepared under Section 6 of the National Audit Act 1983 for presentation to the House of Commons in accordance with Section 9 of the Act

Gareth Davies
Comptroller and Auditor General
National Audit Office

28 April 2025

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The National Audit Office study team consisted of:

Richard Lewis, Rebecca Mavin, Annabelle Brown, Heather James, with assistance from Alex Thomson, under the direction of Oliver Lodge.

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What this briefing is about

1 The Home Office is responsible for asylum and protection in the UK, including ensuring compliance with the UK’s legal commitments. It is responsible for supporting destitute people seeking asylum, while it makes a decision on their asylum claim, by providing financial support and accommodation. The Home Office tries to source houses or flats for most of its accommodation, but when these are not available it uses hotels as a contingency measure.

2 From 2012 to September 2019 the Home Office provided support through six regional contracts, known as COMPASS. Through these contracts, suppliers identified and managed asylum accommodation on behalf of the Home Office. In 2019, the Home Office replaced COMPASS with seven similar regional contracts known as the Asylum Accommodation and Support Contracts (AASCs), plus a national contract for a new helpline and support service (AIRE – Advice, Issue Reporting and Eligibility). The Home Office awarded the AASCs to three suppliers – Clearsprings Ready Homes (Clearsprings), Mears Group (Mears) and Serco – who each took on two or three UK regions. Migrant Help won the AIRE contract.

3 The National Audit Office has previously reported on the Home Office’s contracts for asylum accommodation. In 2014, we examined the transition to COMPASS contracts and found that suppliers had struggled to establish their supply chains resulting in poor performance, delays and additional costs.1 In 2020, we assessed the replacement of COMPASS contracts with AASCs and found that performance was broadly in line with the contract, but that the Home Office faced challenges in adapting services to changing demand.2

4 The Home Office originally estimated that the total cost of the AASCs would be £4.5 billion over their 10-year term. Since then, the number of people seeking asylum and being accommodated by the Home Office has increased significantly. In 2024-25, the Home Office spent an estimated £1.7 billion on the AASCs, and its current estimate of total spend over 10 years is £15.3 billion.

Scope

5 This briefing has been prepared for the Home Affairs Committee as part of its inquiry into the delivery of asylum accommodation. It covers the main contracts for asylum accommodation and support.

6 It describes:

the Home Office’s approach to accommodating people seeking asylum and the services provided by the contracts (Part One);

the performance of the contracts and their profitability (Part Two); and

the Home Office’s oversight of the contracts (Part Three).

7 This briefing does not seek to evaluate the Home Office’s management or oversight of the contracts or to conclude on their value for money. It also does not examine the Home Office’s procurement of the contracts, which we covered in our 2020 report. This briefing uses historic data on performance and profitability reported by suppliers to the Home Office. We have not audited these data and they are subject to an ongoing audit by the Home Office.

1 Comptroller and Auditor General, COMPASS contracts for the provision of accommodation for asylum seekers, Session 2013-14, HC 880, National Audit Office, January 2014.

2 Comptroller and Auditor General, Asylum accommodation and support, Session 2019–2021, HC 375, National Audit Office, July 2020.

Summary

Key findings

8 The Home Office’s total spend on asylum accommodation is more than planned and it has few levers to control costs. The Home Office is responsible for supporting destitute people seeking asylum. It provides ‘initial’ asylum accommodation while it determines the need to provide ongoing support and ‘dispersed’ accommodation while it determines asylum claims. It delivers this through seven regional contracts. It originally estimated that the total contract cost would be £4.5 billion over 10 years. However, the current estimated total is £15.3 billion over the same period. The number of people seeking asylum who are accommodated by the Home Office increased from around 47,000 in December 2019 to around 110,000 in December 2024. People accommodated in hotels account for around 35% of all people in asylum accommodation and for around 76% of the annual cost of the contracts (£1.3 billion out of an estimated £1.7 billion in 2024-25). The Home Office has few levers to control the cost of hotels which may be more profitable for the suppliers than other forms of accommodation. It began using vessels and ex-military bases (large sites) in 2020 as an alternative to hotels but has now begun to close these (paragraphs 1.2 to 1.6, 1.14, 1.18 to 1.21 and Figures 1 to 4).

9 The Home Office has made progress in achieving a more proportionate distribution of people seeking asylum across the country, but 70 local authorities (19% of them) do not have any asylum seekers in initial or dispersed accommodation as of December 2024. All local authorities in England, Scotland and Wales have updated targets for accepting people seeking asylum. During 2024, the Home Office reduced the number with no accommodated asylum seekers from 30% (109 local authorities in England, Scotland, Wales and Northern Ireland) in January to 19% (70) in December (paragraphs 1.18 to 1.19).3

10 Between September 2021 and August 2024, the ‘service credit’ points awarded for underperformance of the accommodation contracts averaged 3% of the maximum possible. As of 31 March 2025, the Home Office has deducted £4 million from suppliers’ revenue since 2019-20 for underperformance.4 The Home Office receives performance data from the Asylum Accommodation and Support Contract (AASC) suppliers. Data show that suppliers usually met targets for providing initial accommodation and maintaining properties, but sometimes missed targets for identifying suitable dispersed accommodation and transporting people. Performance data suggest that overall service credit points awarded for underperformance ranged from 0% to 7.8% of the maximum possible between September 2021 and August 2024. This does not reflect performance at large sites, which the Home Office does not measure. As of 31 March 2025, the Home Office has deducted £4 million from the suppliers’ revenue (less than 1% of the suppliers’ revenue from the contracts) in response to the reported underperformance since 2019.5 The service credit points for the AIRE (Advice, Issue Reporting and Eligibility) service were 14% to 50% (January 2022 to December 2024), and despite relaxing the standard for answering calls to the call centre, it has never met the amended timescales (paragraphs 2.2 to 2.10 and Figures 5 to 8).

11 AASC supplier profit margin, as reported by suppliers, has averaged 7%. Supplier profit is at the lower end of the Home Office’s original estimate (5% to 13%) but each supplier’s reported profit is slightly higher than the operating profit reported in its accounts (3% to 7%). Data from suppliers suggest that hotels may be more profitable than other forms of accommodation. In 2024, the Home Office commissioned a third party to audit the way suppliers report performance data, and the amount of profit they declared. Profit-sharing thresholds differ across contracts and the data reported by suppliers show that five contracts have exceeded their profit share thresholds. This is subject to the Home Office’s audit, and the Home Office expects to agree the amount of profit to be returned once it is complete in June 2025. The AIRE service has reported profit of 5%, below the threshold to return profit (paragraphs 1.18, 2.12 to 2.15 and Figure 9).

12 The Home Office has governance and contract management processes in place and intends to strengthen its financial controls. It has contract management plans, regular governance forums and risk registers in place to manage each contract. It has around 120.5 employees (on a full-time equivalent basis) managing the contracts, including around 50 in its service delivery teams and 60 in a dedicated assurance team. It also has 10.5 in a wider commercial contract management team. Staff numbers have approximately doubled since 2023. The Home Office has made use of open book clauses to receive data on suppliers’ costs and profits and told us it made some use of should-cost modelling to challenge the cost of hotels. It analyses assurance activity, such as property inspections, to identify trends. During our audit of the Home Office’s 2023-24 financial statements, we found issues with evidence supporting hotel invoicing, and the Home Office committed to improve its processes (paragraphs 3.2 to 3.7).

13 The Home Office has established a hub to gather data on safeguarding incidents but does not systematically collect data on outcomes. The legal responsibility for safeguarding people seeking asylum lies with the relevant local authority, but the Home Office recognises the need to safeguard those in its accommodation. The contracts require the suppliers to proactively monitor the people within their care to identify those who may have specific safeguarding needs and require compliance with policies. But the Home Office does not measure their performance, and the contracts do not specify performance deductions related to safeguarding outcomes. The Home Office told us that its safeguarding hub receives up to 4,000 referrals a week. The Home Office has started to categorise referrals but does not consistently produce management information that would allow it to identify trends. Separately it received over 700 notifications from suppliers about urgent or serious incidents between July 2024 and January 2025. The Home Office has produced high-level analysis of these (paragraphs 3.8 to 3.10).

14 Reviews and audits have recommended improvements to contract management, safeguarding and data monitoring which the Home Office has taken steps to respond to. We analysed recommendations from the National Audit Office, Committee of Public Accounts, Independent Chief Inspector of Borders and Immigration, and the Government Internal Audit Agency. Recommendations cover themes such as contract management, planning, safeguarding, risk management and data monitoring. The Home Office has responded to recommendations, for example, by developing a cost model to support AASC renegotiations, publishing a safeguarding framework, and evaluating its data management system. It also has work ongoing in a number of areas such as reviews of its 10-year accommodation strategy, risk management framework, AASC key performance indicators and supplier safeguarding policies (paragraphs 3.11 to 3.12 and Figure 10).

3 The Home Office includes Northern Ireland in its reporting. All 350 local authorities in England, Scotland and Wales have dispersal targets. The 11 districts in Northern Ireland do not have dispersal targets.

4 Performance against each key performance indicator (KPI) is converted to a number of ‘service credit’ points, with zero points awarded if the target is met, and higher points added for greater levels of underperformance. The contract caps the number of points that can be awarded. Based on the data provided by suppliers, the points awarded for underperformance averaged 3% of the maximum that could have been awarded had all seven regions missed each KPI by the maximum amount each month.

5 Due to a time lag between agreeing performance and applying associated service credits, deductions are not always applied in the year that underperformance occurred.

Part One

Overview of the asylum accommodation service

1.1 This part sets out the Home Office’s approach to accommodating people seeking asylum.

Types of asylum accommodation

1.2 Under the Immigration and Asylum Act 1999, the Home Office is responsible for providing accommodation and support for people claiming asylum who would otherwise be destitute (Figure 1). The Home Office provides:

initial accommodation, where people stay while the Home Office determines whether it needs to provide ongoing support and while longer-term accommodation is located – this is generally hostel-type accommodation;

dispersed accommodation, where people stay until their claim is resolved, including during the course of any appeals – dispersed accommodation is usually houses or flats in residential areas; and

contingency accommodation, where people stay when there is not enough dispersed accommodation available to move people into – the Home Office uses hotels and large sites such as vessels and ex-military bases as contingency accommodation.

1.3 The Home Office has used contracts to find and maintain accommodation since 2000-01 when contracts were agreed through the National Asylum Support Service. In 2006 the Home Office replaced these with 22 contracts, known as ‘target’, with 13 suppliers. In 2012, it replaced these with six larger regional contracts, also including transportation, known as COMPASS. We reported on COMPASS in 2014 and concluded that suppliers had struggled to establish their supply chains, resulting in poor performance, delays and additional costs.

1.4 In 2019, the Home Office awarded seven regional contracts for asylum accommodation. The contracts are known as Asylum Accommodation and Support Contracts (AASCs) and were awarded to three suppliers. We reported on the introduction of the AASCs in 2020. We found that performance was broadly in line with the contract, but the Home Office faced challenges in adapting services to changing demand.

1.5 At the same time as awarding the AASCs, the Home Office awarded a contract for a national help and advice service known as the Advice, Issue Reporting and Eligibility service (AIRE). The aim of the AIRE service is to provide impartial and independent information, advice, guidance and assistance to help people claiming asylum. It helps people:

understand the claim process;

understand how to access local facilities such as healthcare; and it

gives people in accommodation a way to raise issues to a party independent of both the accommodation supplier and the Home Office.

The distribution of people seeking asylum across the country

1.6 The number of people seeking asylum who are accommodated by the Home Office increased by 134% between December 2019 and December 2024, from around 47,000 to around 110,000 people. This is due to an increase in people entering the UK by crossing the English Channel and a rise in people claiming asylum who were previously detained under the Illegal Migration Act 2023.6

1.7 The Home Office aims to distribute the asylum seekers that it accommodates in a way that manages the impact on local authorities. While local authorities are not signatories to the Home Office’s contracts, the contracts include requirements for the supplier to:

liaise and consult with the relevant local authority regarding the location of accommodation;

ensure it obtains any required housing licences before using properties as dispersed accommodation; and

escalate any issues to the Home Office.

1.8 Since March 2023, the Home Office has set all authorities in England, Scotland and Wales targets for the number of people seeking asylum to be housed in their area.7 These targets are based on a range of factors including availability of housing and wider social factors such as homelessness. The Home Office updated these targets in 2024.

1.9 As of December 2024, Home Office data show that 70 local authorities out of 361 (19%) in England, Scotland, Wales and Northern Ireland had no people seeking asylum in either initial or dispersed accommodation, compared with 109 (30%) in January 2024.

The current asylum accommodation contractual model

1.10 This section sets out the key aspects of the current asylum accommodation contracts (Figure 2). It includes how the contracts specify the amount of accommodation to be provided, and how the contract pricing mechanism works.

Accommodation provided under contracts

1.11 The contracts limit the amount of accommodation that the suppliers must provide each year. Across the seven regions the contracts require initial accommodation for a total of 1,750 people. In the South region, the supplier also provides additional short-term initial accommodation until the Home Office decides which region to send people to.8 The contract allows for any empty spaces in initial accommodation to be used temporarily as dispersed accommodation.

1.12 The amount of dispersed accommodation that the suppliers are required to provide was expected to grow up to a final cap. The cap was originally set at 70,000 people and, following renegotiations, stands at 100,300 as of December 2024.

1.13 As of December 2024, Home Office data show that some 1,800 people were in initial accommodation (slightly higher than the cap of 1,750) and some 66,000 people were in dispersed accommodation. The total number of dispersed accommodation spaces was some 34,000 below the contractual cap (Figure 3).

1.14 The Home Office set up the contracts so that temporary dispersed accommodation (or ‘contingency accommodation’, typically in hotels), is used when there is not enough dispersed accommodation available. Home Office data show that suppliers had contracted 222 hotels on 1 January 2025, accommodating around 35% of all people in asylum accommodation (around 38,000 people). In comparison, suppliers had 348 hotels available on 1 January 2024, accommodating around 46,000 people.9

1.15 The contracts state that contingency accommodation should be used on a short-term basis only. Data show that 98 (44%) of hotels are on rolling contracts with a three month notice period and another 89 are due to be renewed in 2025. The suppliers are responsible for finding the hotels and agreeing the contracts. But the use of contingency accommodation must be agreed and approved by the Home Office.

The pricing mechanism

1.16 Much of the price paid under the AASCs for initial and dispersed accommodation is determined by the number of people being accommodated, which means it is not directly controllable by the Home Office. The suppliers receive a fixed management fee (which varies by region and in total was some £22 million in 2024-25, around 5% of the cost of non-hotel accommodation), but most of the payment is directly linked to the number of people accommodated. The Home Office designed the contract so it would only pay for occupied accommodation spaces. The contract defines a range of per-person-per-night fees for initial and dispersed accommodation. A similar mechanism determines the price paid to suppliers for transporting people in accommodation, with prices determined by the number of journeys completed and their distances.

1.17 The per-person rates are fixed in the contract, and may vary based on the following factors.

The number of people accommodated each month: Once volumes exceed a threshold, a different unit price may be charged.

Certain characteristics of people accommodated in dispersed accommodation: Different rates are charged for people accommodated as families, and for ex-Foreign National Offenders released on criminal bail.

The level of general inflation: Prices increase each year with inflation, as measured by a weighted average of the Consumer Price Index (CPI) and the Consumer Price Index including owner occupiers’ housing costs (CPIH).

1.18 The contracts specify that contingency accommodation is priced on a site-by-site basis.10 People accommodated in hotels account for 76% of the annual cost of the contracts (£1.3 billion out of an estimated £1.7 billion in 2024-25).11 Data reported by suppliers suggests that hotels may be more profitable than other forms of accommodation. To help control costs, the Home Office has worked with suppliers to maximise the number of usable beds. For example, it shared more data about demand, such as family sizes, and estimates that this, along with other measures such as greater use of room-sharing, has helped suppliers increase occupancy from 75% to 80% between November 2023 and June 2024, avoiding £109 million being spent on hotels. This has meant that the Home Office has taken a greater role in matching people to accommodation spaces than was anticipated in the contract as originally drafted.

Changes to the Asylum Accommodation and Support Contracts

1.19 The Home Office has modified the contracts 257 times (across all seven regions) between 2019 and January 2025. The changes relate to managing the impact of COVID-19 (around 48% of changes), adding large sites (16%), other changes relating to increasing volumes (12%), and other changes including administrative activities such as suppliers changing the key staff named in the contract. The Home Office does not have a documented negotiating strategy for agreeing contract changes and agrees changes with the three suppliers on a case-by-case basis.

1.20 The most significant change to the contract was the introduction of large sites. The Home Office began using large sites as contingency accommodation in 2020 (Figure 4). This was partly in response to the COVID-19 pandemic, which made it difficult to move people out of asylum accommodation, adding to already rising volumes. The Home Office announced an expansion of the use of large sites in April 2023 as part of its efforts to reduce its reliance on hotels. It modified the AASCs to allow the suppliers to manage operations at some large sites. Unlike other forms of accommodation, the sites and buildings are owned or leased by the Home Office. Suppliers are paid based on a mix of actual costs, with some fixed- or volume-based elements.

1.21 The Home Office no longer plans to use large sites other than Wethersfield. It found that costs increased and has now recognised that accommodating large numbers of people near small local communities is difficult to manage. We reported on the Home Office’s work to establish large sites in March 2024, and concluded that, in rapidly progressing its plans, it incurred nugatory spending and increased risk.12

Future plans

1.22 The AASCs were approved by HM Treasury on the grounds that the Home Office consider how it could manage costs in the longer-term. The Home Office is currently reviewing its 10-year accommodation strategy. We have previously recommended that the Home Office start planning sufficiently early for the next procurement of asylum accommodation contracts to allow time for ministers to consider changes to the model.13

6 The Illegal Migration Act became law in July 2023. It sought to detain and then remove people who arrived in the UK by small boats or other irregular means. In July 2024 the Home Office published regulations to allow asylum claims to be processed.

7 The 11 districts in Northern Ireland do not have dispersal targets. The Home Office only allocates people arriving in these districts to the Northern Ireland region.

8 This is different from the processing centre at Manston, which is operated under a separate contract.

9 The data on number of hotels in use was provided by the Home Office. It told us that these data change daily. We have not verified these data.

10 The Home Office agreed a single cost for some hotels used within the Clearsprings contracts.

11 The amount spent during 2024-25 has not yet been finalised.

12 Comptroller and Auditor General, Investigation into asylum accommodation, Session 2023-24, HC 635, National Audit Office, March 2024.

13 Comptroller and Auditor General, Asylum accommodation and support, Session 2019–2021, HC 375, National Audit Office, July 2020.

Part Two

Performance and profitability of the contracts

2.1 This part sets out performance of the Asylum Accommodation and Support Contracts (AASCs) and the Advice, Issue Reporting and Eligibility service (AIRE) against key performance indicators (KPIs), and the profit reported by the suppliers.

Performance against key performance indicators (KPIs)

KPIs for the AASCs

2.2 The AASCs contain nine KPIs, which are reported as 10 quantified measurements each month (Figure 5).14 The KPIs cover the key property-related parts of the contract, including identifying accommodation; transporting people there; maintaining it to ensure it is safe, habitable and fit for purpose; resolving complaints and providing management information to the Home Office.

2.3 We analysed the performance data reported by suppliers covering September 2021 to August 2024. The contract specifies that performance against each KPI is converted to a number of ‘service credit’ points, with zero points allocated if the target is met, and higher points added for increasing levels of underperformance.

2.4 Based on the data provided by suppliers, the points awarded for underperformance averaged 3% of the maximum that could have been awarded had all seven regions missed each KPI by the maximum amount each month (Figure 6).

2.5 Further information about performance against each KPI is available in Appendix Two. In summary, the suppliers reported the following.

Consistently achieving contractual targets for locating initial accommodation and providing management information: The provision of initial accommodation has always been reported as 100%, in every region, against a target of 98%, and suppliers never reported exceeding the contractual allowance of up to two late or inaccurate submissions of management information each month.

Missing targets for identifying dispersed accommodation and transporting people to accommodation several times: For example, reported performance for identifying dispersed accommodation was 42% in the South region in October 2022.

Generally responding to maintenance issues within contractual tolerances, although there have been disputes over the data in the South: The contract defines three severities of defect, from issues rendering the property unsafe, to more minor issues, and allows greater time to fix less severe issues. Suppliers generally met these timescales, although there were 133 reported failures in Mears’ Scotland region in July 2022, and performance in the South is marked as under dispute in some months, where the Home Office and Clearsprings disagreed on the severity of an issue. Resolving complaints within required timescales was missed in some months, particularly in Serco’s regions in 2022.

2.6 The Home Office has not revised AASC KPIs and performance thresholds since the contracts began. The KPIs cover initial, dispersed and contingency accommodation. The Home Office started a review of these in December 2024. In our 2024 report, we noted that KPIs for large sites had not yet been agreed and that the Home Office was still developing specific KPIs for large sites. The suppliers provide monthly performance packs for Wethersfield and Napier, but, while they track occupancy rates, they do not include any measurements of performance.

2.7 The Home Office also considers the performance of AASC subcontractors. In March 2025, the Home Office informed the AASC supplier Clearsprings that it must exit arrangements with its subcontractor Stay Belvedere Hotels Ltd due to poor performance and behaviour. When managing contracts, the Home Office must balance any enforcement with the need to maintain continuity of service for people seeking asylum. On 25 March 2025, the Home Office announced in Parliament that it is conducting a full audit of the AASC supply chain.

KPIs for the AIRE contract

2.8 The AIRE contract contains 16 KPIs, which are measured each month. The KPIs cover the main services provided but focus on the provision and timeliness of the service rather than quality or outcomes. The Home Office has, at times, relaxed the measurement of some KPIs, for example, between December 2022 and December 2023, it relaxed the time taken to answer phone calls to the call centre from 90% in one minute to 80% in 10 minutes. Despite the amendment, the supplier never achieved the KPI between January 2022 and December 2024.

2.9 The contract specifies that performance against each KPI is converted to ‘service credit’ points, with zero points allocated if the target is met. More points are added for worse performance. Overall, the AIRE service has performed below expected levels, and the total service credit points ranged from 14% to 50% of the maximum points that could have been awarded had KPIs been missed by the maximum amount in each month (Figure 7). For example, between January 2022 and December 2024:

two KPIs, which relate to answering phone calls quickly enough, were missed and were allocated the maximum points for underperformance nearly every month, despite the target being relaxed;

the time to submit forms recording changes of circumstances averaged nine days, against a target of five days; and

as shown by the data, there were more than 1,300 failures to provide an induction service to new arrivals within the required timescales.

Service credits for reported underperformance

2.10 As of 31 March 2025, the Home Office has reduced the amount paid to the AASC suppliers by £4 million since 2019-20 due to the reported underperformance (Figure 8).15 The contracts allow the Home Office to deduct amounts from the total payment to suppliers based on the reported underperformance against each KPI. The Home Office can waive the deduction, in full or in part, where the supplier can show there are mitigating circumstances. Over the life of the contracts, the total amount deducted is less than 1% of the Home Office’s total spending on the contracts and is less than the maximum the Home Office could have deducted, given the level of reported underperformance. The contract caps the maximum deduction for underperformance as follows.

A limit is placed on the number of points that can be awarded for each KPI.

Each KPI is assigned to one of four contract areas, and the total for each area is capped at 3,000 points.

The deduction can be up to 12% of the monthly service payment for each area multiplied by the points for that area divided by 3,000.

2.11 As well as imposing deductions, the Home Office can require suppliers to develop performance improvement plans, but it has not always done so. The Home Office provided evidence of discussions with suppliers regarding performance issues, but these did not contain milestones or specific actions.

The profit earned by the Home Office’s suppliers

2.12 The total reported profit of suppliers was £383 million between September 2019 and August 2024. In the first five years of the contract, available data from suppliers show annual profit margins ranging from a loss of 2% to a profit of 17% (Figure 9). This is equivalent to an overall 7% profit margin across the whole service, which is:

at the lower end of the 5% to 13% range estimated by the Home Office when the contracts were awarded; and

slightly higher than the 3% to 7% operating margin reported in the suppliers’ accounts.16

2.13 The data provided by suppliers to the Home Office are not in a consistent format, and different suppliers have provided the Home Office with different levels of detail. The data are self-reported, and in 2024 the Home Office commissioned a private sector firm to audit the way suppliers report performance data, and the amount of profit they declared. It expects to conclude this work in June 2025.

2.14 The AIRE supplier reported annual profits ranging from 1% to 12%, with an average of just under 5%. The reported data do not give the Home Office information on which elements of the AIRE service are most profitable.

Profit share clauses

2.15 The AASCs include profit share clauses. The contractual clauses trigger when mark-up, which is defined as profit divided by cost, exceeds a per-region threshold. Profit share thresholds differ across the contracts. The data reported by suppliers show that five contracts exceeded their respective thresholds in individual years, totalling seven times between September 2019 and August 2024. The Home Office expects to confirm and agree the amount of profit to be returned once the audit (paragraph 2.13) is completed. Two of those contracts exceeded their profit share threshold mark-ups in an individual year, but because the mechanism operates cumulatively, below-threshold mark-ups at the start of the contracts offset results in later years. The AIRE service has a similar profit share clause that is triggered at 5% mark-up, and this has not yet been triggered, according to the data we have seen.

14 The KPI for proposing suitable accommodation is reported as two measurements, one for proposing initial accommodation and one for proposing dispersed accommodation.

15 Due to a time lag between agreeing performance and applying associated service credits, deductions are not always applied in the year that underperformance occurred.

16 Operating margins in published accounts of the suppliers are 2.8%, Serco Ltd, year ending 31 December 2023; 4.6%, Mears Ltd, year ending 31 December 2023; and 6.7%, Clearsprings Ready Homes Ltd, year ending 31 January 2024. These include other contracts and activities.

Part Three

The Home Office’s oversight of the service

3.1 This part sets out how the Home Office manages the contracts, oversees performance and how it has responded to recommendations from reviews and audits.

Contract management arrangements

3.2 The Home Office manages each contract through three types of regular governance forums:

monthly contract management groups, which discuss day-to-day operational issues and the performance of the service;

quarterly strategic relationship management boards, which discuss and agree performance and other issues that may affect strategic direction; and

quarterly executive oversight boards, which cover all the regions operated by each supplier.

There is no board that considers the service as a whole, but the Home Office has internal boards to review performance of its major contracts.

3.3 The Home Office has contract management ‘plans’ in place for each contract. These provide information about the key contractual terms and are in a consistent format. The Home Office agrees joint risk registers with each supplier to track the highest risks relating to the service. They are in a different format for each supplier.

3.4 The Home Office has a dedicated assurance team to scrutinise the suppliers’ performance, including through its own inspection regime. It aims to inspect initial accommodation every six months and 25% of dispersed accommodation each year. The Home Office uses these inspections to check supplier performance, particularly in relation to the key performance indicators around maintaining properties. The Home Office analyses this activity to identify trends. The assurance team has 88 roles, of which 25 were vacant as of March 2025.

3.5 The Home Office has around 120.5 employees (on a full-time equivalent basis) overseeing the contracts. This includes around 50 employees in three operational service delivery teams, each headed by a dedicated grade six for each supplier, and 60 employees in its assurance team. It also has 10.5 employees, including seven permanent and 3.5 consultant employees, in its wider commercial contract management team.17 Home Office data suggest it has approximately doubled the number of employees managing the contracts since 2023. The Home Office told us that it had increased the number of commercially qualified staff, and that 51 people in the service management team are undertaking the Cabinet Office’s recommended contract management training. The Home Office said that increasing its capability had allowed it to better challenge suppliers’ performance. In January 2025, it started to recruit six more civil servants for its commercial contract management team. The Home Office has also established a separate team to manage large sites, including managing other contracts relating to each site, and has a dedicated senior responsible officer based on-site at Wethersfield.

Financial oversight

3.6 As part of testing on our audit of the Home Office’s 2023-24 financial statements, we reviewed a selection of Clearsprings monthly invoices for hotels. The Home Office was not able to provide a complete evidence trail to support the amounts being charged that were higher than the original agreement. By extrapolating the difference in amounts across the three Asylum Accommodation and Support Contract (AASC) suppliers, we estimated that £58 million was potentially unsupported for that financial year. Although not material, this suggested basic invoicing controls could be improved to reduce the risk of overpayment. We recommended the Home Office review the controls in place and ensure records (including modifications) are maintained on a shared drive. The Home Office committed to improve its documentation.

3.7 The Home Office has not exercised its contractual right to benchmark the service but has used financial models to challenge costs in some instances.18 It told us it has modelled what providing accommodation should cost and used this to challenge suppliers when negotiating changes. It has used open book access rights to receive data on suppliers’ costs and profits (see Part Two). It also maintains records of hotel prices and requires suppliers to provide details of how prices are broken down.

Safeguarding

3.8 The legal responsibility for safeguarding people seeking asylum lies with the relevant local authority, but the Home Office recognises the need to safeguard those in its accommodation. The contracts require the suppliers to proactively monitor the people within their care to identify those who may have specific needs or may be at risk. The Home Office also requires suppliers to comply with its policies, provide staff with adequate training, and report serious incidents to the Home Office. However, it does not measure suppliers’ performance in safeguarding people, and the contracts do not specify performance deductions related to safeguarding outcomes.

3.9 In 2017, the Home Office established an asylum safeguarding hub which, it told us, receives and triages up to 4,000 referrals of safeguarding concerns a week. Hub staff can escalate concerns where necessary, and record issues on individual immigration case-working files. The Home Office has also put systems in place for suppliers to notify it about urgent or serious incidents – such as the death of a person in asylum accommodation, serious self-harm or violence – through High-Profile Notifications (HPNs) and We Are Aware (WAA) processes. The Home Office received over 700 notifications (690 HPNs and 37 WAAs) between July 2024 and January 2025.

3.10 The Home Office has produced high-level analysis of serious incidents, finding that incidents did not appear to be more common in accommodation overseen by any particular supplier. It has also started to categorise referrals to the safeguarding hub but does not consistently produce management information that would allow it to identify trends, proactively monitor lower-level safeguarding concerns or monitor the outcomes of incidents and referrals. The Home Office told us that, given it does not have a statutory obligation for safeguarding, the hub does not consistently monitor the outcome of referrals.

Review and audit recommendations

3.11 The Home Office’s management of the AASCs has been scrutinised by multiple reviews and audits, including by the National Audit Office, the Committee of Public Accounts, the Independent Chief Inspector of Borders and Immigration and the Government Internal Audit Agency. Figure 10 sets out recommendations made in these reviews and the Home Office’s response.

3.12 The Home Office has received recommendations on contract management, planning, safeguarding and data monitoring. It has set out work undertaken to address these alongside ongoing work. This includes reviews of its 10-year accommodation strategy, risk management framework, AASC key performance indicators (KPIs) and supplier safeguarding policies, as well as a data management project to bring supplier data into a single platform.

17 These numbers are approximate and include some people who also work on other contracts.

18 The contract allows the Home Office to commission an independent review of the services being received, comparing them with other similar services (to be decided by the reviewer using its professional judgement). It allows a review of the contract each year, starting from the third year. The Home Office would need to pay for such a review, but could recover costs if the service was found to not be good value.

Appendix One

Our approach

Scope

1 We produced a factual briefing on the Home Office’s asylum accommodation contracts. The briefing has been prepared for the Home Affairs Committee as part of its inquiry into the delivery of asylum accommodation.

2 In response to a request from the Committee, we have set out:

the Home Office’s approach to accommodating people seeking asylum and the services provided by the contracts;

the performance of the contracts and their profitability; and

the Home Office’s oversight of the contracts.

3 We have not evaluated the Home Office’s management or oversight of the contracts or concluded on their value for money. We did not examine the Home Office’s procurement of the contracts, which we covered in our 2020 report.19

4 We conducted our fieldwork between February and March 2025. We used data held by the Home Office, some of which are self-reported by suppliers. We have not audited these data, and they are subject to an ongoing audit by the Home Office.

Methods

5 In examining these issues, we drew on a variety of evidence sources. We reviewed key documents including:

the Asylum Accommodation and Support Contracts (AASCs), the Advice, Issue Reporting and Eligibility contract, and records of key contract changes since 2019, to understand the contractual terms, including the pricing mechanism, profit share clauses, performance regime and intended operation of the contracts;

performance data provided by the suppliers to the quarterly governance forums for the last three years to understand the performance against contractual key performance indicators;

data on the amount of service credits imposed as a result of the reported performance;

data on profitability, provided to the Home Office under open book access rights, to understand the profit being made, which we compared with previous estimates and with the suppliers’ published accounts;

the Home Office’s contract management plan, risk registers, governance arrangements (including minutes of oversight boards), and details of the teams managing the contracts to understand how the Home Office manages the contracts;

the Home Office’s latest estimate of total contract value, and annual spending on the contracts;

details of the number of people and type of accommodation used in the AASC contracts;

details of the number of local authorities accepting people seeking asylum;

details of hotels used, including when they end;

information from the National Audit Office (NAO) financial audit of the contracts, including work on financial controls;

data on reports to the Home Office’s safeguarding hub, to understand how the Home Office ensures that people in its accommodation are kept safe; and

details of how the Home Office has responded to recommendations from assurance bodies including the NAO, Committee of Public Accounts, Government Internal Audit Agency, and the Independent Chief Inspector of Borders and Immigration, to understand how the Home Office has worked to improve management and oversight.

19 Comptroller and Auditor General, Asylum accommodation and support, Session 2019–2021, HC 375, National Audit Office, July 2020.

Appendix Two

Performance against key performance indicators

1 Figure 11 shows performance against the asylum accommodation key performance indicators.

Design and Production by NAO Communications Team
DP Ref: 016888-001