Shabana Mahmood recoups £74m in tax cash from 'excessive' migrant hotel contracts

The move came after a review discovered that the suppliers had been pocketing "excessive" profits over the agreed thresholds in the bumper contracts dished out by the Home Office.

Just weeks ago, an investigation carried out by MPs uncovered that incompetence at the Home Office led to billions of pounds of public money wasted.

The review uncovered the estimated cost of the decade-long contracts handed out to house asylum seekers skyrocketed from £4.5billion to £15.3billion.

The cross-party group of MPs also slammed Home Office officials for failing to claim back tens of millions of pounds in excess profits owed by the hotel providers.

The committee said that the owed funds “should be supporting public services not sitting in the accounts of private businesses”.

As of June 2025, 32,095 illegal migrants were still living in taxpayer-funded hotels across Britain.

The accommodation costs taxpayers £2.1billion annually, equating to £145 per asylum seeker every day.

However, the Home Secretary has claimed the Home Office have slashed this figure by £700million over the past 12 months.

Ms Mahmood said: “This Government inherited asylum hotel contracts that were not delivering good value for taxpayers’ money.

“We have already saved £700 million in hotel costs. Now we are recouping millions more in excess profits.

"And by the end of this parliament, we will have closed every asylum hotel.”

The cross-party investigation concluded the Home Office missed an opportunity to renegotiate the terms of their contracts when the Government increased its use of hotels in the midst the pandemic.

The decision to use more hotels to house illegal migrants allowed the suppliers to boost their profits six-fold.

The committee wrote: “Profit share clauses failed to account for the large expansion of hotel accommodation, generating vast profits for providers.

“The Home Office should ensure future contracts take into account overall cash value of profits to prevent providers generating excessive returns from increased demand.”

The department is now seeking to engage with providers over new contracts to replace the current agreements, which expire in 2029.

The new asylum accommodation deals are expected to run for seven years, until 2036, with the option of a three-year extension.

The Home Office said the Government is “determined” to deliver greater efficiency in the use of public money.

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