Labour has been warned Britain’s asylum system could cost an extra billion pounds by 2028/29 should spending persist at current levels, according to the Office of Budget Responsibility (OBR).
The budget watchdog warned asylum expenditure could face an additional £1.4billion in pressures by 2028/29.
Earlier this year, the Labour Government promised to end housing asylum seekers in hotels by the next election and vowed to cut spending on asylum by £1.1billion.
However, the OBR forecast warned the number of arriving small boat migrants and asylum seekers in supported accommodation has risen by 19 per cent and 8 per cent respectively compared with last year.
The report warns £1.4billion extra could be spent by 2028/29 if spending remained at 2024/25 levels.
The watchdog said: “The Home Office Spending Review settlement was made on the basis that the Home Office would fully stop the use of hotels for asylum-seekers in this Parliament, and asylum spending would be £1.1billion lower at £2.5billion in 2028-29 compared to 2025-26 plans.
“So far this year, the number of migrants arriving by small boat and asylum seekers in supported accommodation has risen by 19 and 8 per cent, respectively, compared to last year.
“If spending on asylum remained at its 2024-25 level, this would imply £1.4billion of additional pressure on the Home Office budget by 2028-29.”
Rachel Reeves unveiled her Budget on Wednesday, revealing a ‘dirty dozen’ tax rises
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Back in May, the National Audit Office (NAO) revealed the cost of asylum accommodation is expected to be more than three times higher than previously estimated at £15.3billion over the next 10 years.
This cost, according to the NAO, is borne from the rising demand for accommodation from those who were previously detained under the Conservative Government’s Illegal Migration Act 2023.
Sir Keir Starmer has said he wants to see asylum hotels closed “as quickly as possible”.
In a bid to ease the burden, the Home Office has confirmed two military barracks in Scotland and southern England will be used to temporarily house approximately 900 migrant men to ease pressure on asylum hotels.
The OBR warned asylum expenditure could face an additional £1.4billion by 2028/29
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Just weeks ago, Home Secretary Shabana Mahmood announced a raft of reforms to the asylum system aimed at deterring illegal migration to the UK and to make it easier to deport people.
Under the planned changes, almost two million migrants who arrived in Britain from 2021 must have stayed in the country for 10 years before earning settled status.
Under this “earned” settlement plan, migrants could be fast-tracked or forced to wait longer depending on their “contributions” to the UK.
Migrants reliant on benefits will meanwhile face a 20 year wait for settlement, which is four times the current period and the longest in Europe.
The OBR added: “While our forecast has incorporated most of the changes announced in the White Paper, we do not have sufficient detail on indefinite leave to remain to incorporate these changes.
“The Government’s stated intention to consult on asylum policy is also a risk to our forecast.”
The findings come just hours after Chancellor Rachel Reeves revealed her anticipated Budget in which dozens of tax raids were announced.
Ms Reeves confirmed tax rises worth £26billion after a downgrade in the UK’s growth outlook by the OBR.
More than 1.7 million people are set to pay more income tax due to the continued freeze on thresholds, which will push workers into higher tax bands as wages rise.