Written evidence submitted by Dr Paul Gilbert, Dr Olivia Taylor, Professor Emma Mawdsley, Dr Jessica Sklair, Dr Jo-Anna Russon and Dr Brendan Whitty (AAC0059)

This contribution focuses on the Home Office’s use and management of asylum accommodation contracts, specifically the performance of providers in delivering appropriate accommodation, especially with regard to managing and sharing data. We write as members of an Economic and Social Research Council-funded research project concerned with the aid-funded contractor market (‘Development consultants and contractors: for-profit companies in the changing world of Aidland’, 2021-25).[1] As part of this project we have created novel datasets tracing aid flows to and through private contractors using proprietary & open aid data; scrutinised procurement processes; and mapped the market ecology of the aid-funded business sector. Because of the rapid expansion of the proportion of Official Development Assistance (ODA) allocated via the Home Office since 2022, our research has incorporated a focus on Home Office contracting practices. We make reference to some of these findings in this submission, but are happy to supply details of our methodology, evidence base, and wider analysis on request.

This submission focuses on two areas of concern: (1) the management of asylum accommodation contracts as part of the ODA budget, and the apparently excessive profits charged by asylum housing contractors; and (2) the lack of transparency in relation to these contracts especially in comparison with other ODA-funded contracts from DFID/FCDO.

(1)    Use & Management of Asylum Accommodation Contracts: Costs & Excessive Profits

In-donor refugee costs have spiralled as a proportion of Official Development Assistance reported by OECD donors, with 13.8% of total OECD aid funding allocated to in-donor refugee support in 2023 (Eurodad 2024). Even against the backdrop of this wider trend, the UK remains an outlier in terms of the annual amount it reports ‘per head’ for refugee support: while 23/31 donors report costs of under US$10,000 per head, the UK reports US$26,000 per head (Mitchell and Hughes 2024).

The diversion of the ODA budget to in-donor refugee support has been criticised for reducing the amount available to be spent on global poverty reduction (ICAI 2023). This does not necessarily represent opposition to spending on in-donor refugee support itself, merely the displacement of other ODA spending within a tightly capped developed budget (0.7% GNI, or 0.5% GNI since 2020). It is possible, but not necessary, to allocate in-donor refugee costs to the ODA budget. Such costs were recorded as zero in 2011, and negligible even during the 2012-2017 lifetime of the COMPASS asylum housing contracting scheme (see Table 1).

It is clear that more recently there has been a deliberate choice made to report in-donor refugee costs as ODA, and that this comes at the expense of other potential ODA allocations, up to the 0.5% GNI ceiling. It is also clear that despite spending the most per head ($26,000) of OECD donors reporting in-country refugee spending as part of their ODA budgets, this does not reflect quality or even adequate accommodation in many cases (see for example NB & Ors v. Secretary of State for the Home Department [2021] on the failure to meet minimum standards at Napier Barracks). Documented instances of children living in infested accommodation, and pregnant mothers being left without care in substandard housing have led migration scholars to argue that asylum seeker housing contracts (including NASS and COMPASS) have “rewarded private companies at huge emotional and physical cost to asylum seekers” (Grayson 2020: 195; also Hirschler 2021).

As part of our research, we have examined the contracts awarded to the large outsourcing firms as part of successive asylum accommodation schemes (not all of which have been allocated to ODA budgets). Using Tussell data, we find G4S capturing contracts worth £3.8 billion, Mears capturing contracts worth £1.4 billion, Serco capturing £5.5 billion, and the specialist housing provider Clearsprings capturing £4.4 billion between 2012-2022. Most of this contract value, however, relates to the COMPASS housing scheme initiated in 2012, and replaced in 2019.

We  adopted a methodology utilised by Bowman et al. (2015) and the Balanced Economy Project (2022) for identifying possible ‘excess profits’ in outsourcing contracts: examining Return on Capital Employed (ROCE). ROCE is often high in sectors which require minimal capital investment, for example those who generate returns through human capital or intellectual property and can also be very high among government contractors who deliver mundane services for the state, where services require limited capital investment because they are based on leasing much of the essential components of their service: in this case accommodation.

A standout finding, from examining accounts filed with Company House, is that between 2021-2023, Clearsprings’ ROCE figures were consistently high: 25% for the F/Y ended 2021, 96% for the F/Y ended 2022 and 115% for the F/Y ended 2023 (Clearsprings Ready homes Ltd, 2021; 2022; 2023).  For example, they are higher than the most recent data for Nvidia, which became the world’s most valuable company in June 2024, on account of significant global demand for computer chips[2] (with a ROCE for F/Y ended 31st January 2024 of 73.5%[3]). What this indicates is the potential for significant profitability that, in recent years, has come with negligible financial risk for contractors such as Clearsprings, reflecting a predominantly sub-contracting business, that can flex and generate an economy of scale, whilst requiring very minimal holdings.

This highlights potential failings in the contract management system, which seems to enable substandard provision and excessive profits, while allocating spending (by choice) to ODA budgets, displacing other spending on global poverty reduction. Our research suggests that this is not standard across the UK’s ODA funded contracts. DFID/FCDO has in fact introduced fee caps, and numerous measures to prevent excessive profit-making and ensure rigorous impact evaluation.

We recommend that the Committee review its contracting arrangements to both reduce excessive profiteering and secure greater value for money, while holding providers to higher standards in terms of the accommodation provided. We also recommend that the UK revert to the former DAC norm of only allocating ODA for the first year of in-country refugee support.

If the choice is made to allocate asylum seeker housing to the ODA budget, then this should be accompanied by a ‘race to the top’, replicating the higher contracting standards found in DFID/FCDO ODA contracting arrangements, rather than a race to the bottom.

(2)    Managing and Sharing Data

Despite allocating an increasing portion of the ODA budget to in-donor refugee costs, and profitable contracts managed by firms such as Clearsprings, data transparency has been poor. The International Aid Transparency Initiative (IATI) records ODA-eligible spend by government departments, with the former DFID the first ministry to require reporting to IATI in 2011.  Unfortunately, despite allocating an increasing amount of the ODA budget, the Home Office has not kept pace with DFID/FCDO IATI reporting. Table 1 shows a summary of comparisons between the UK ODA figures released by UK Government Statistics, and spending reported on IATI. With a total of $1.7bn spend reported for past activities, this comes nowhere close to capturing the £2.9bn alone spent by the Home Office on ODA in 2023. There is a significant amount of funding ‘missing’ from the IATI reports, and substantial amounts appear to have been spent under asylum accommodation contracts with G4S, Mears, Serco and Clearsprings.

This lack of adequate transparency and reporting in relation to a significant portion of the ODA budget post 2023 has occurred despite these contracts being awarded to firms who have previously been investigated and censured for a lack of transparency in their reporting practices (Bowman et al. 2015; Greasley 2019; Stafford and Stapleton 2018)

Recommendations: we urge a higher standard of reporting to IATI for as long as the Home Office continues to spend a large and growing share of the ODA budget, seemingly on profitable asylum seeker housing.

Without doing this, there is a risk that the diversion of the ODA budget through the Home Office will undermine and reverse longstanding efforts towards transparency and traceability of aid flows. This is all the more important when spending is in-country, with UK firms which have been criticised for not providing services of the standards expected of development initiatives.

Table 1: Comparison of ODA spend via Home Office reporting through official OECD DAC ODA accounts and via IATI data. Data derived from DFID, FCDO, OECD and IATI. UK ODA spending compiled from DFID (2015, 2016, 2017, 2018, 2019, 2020) and FCDO (2021, 2022, 2023, 2024). Data on Home Office in-Donor Refugee Spend for 2019-2023 was included as a Supplementary Table in the 2024 data. Data on Home Office ODA spend is missing for 2012 but assumed to be zero (rising to 0.3% in 2013)

Balanced Economy Project. 2022. Large firms making excessive profits in children’s social care; CMA ducks the challenge. London: Balanced Economy Project.

Bowman, A., Erturk, I., Folkman, P., Froud, J., Haslam, C., Johal, S., Leaver, A., Moran, M., Tsitsianis, N. and Williams K. 2015. What a waste: Outsourcing and how it goes wrong. Manchester: Manchester University Press.

Clearsprings Ready Homes Ltd. 2021. Clearsprings Ready Homes Ltd Annual Report and Financial Statements for the Year Ended 31st January 2021. https://find-and-update.company-information.service.gov.uk/company/07921508/filing-history

Clearsprings Ready Homes Ltd. 2023. Clearsprings Ready Homes Ltd Annual Report and Financial Statements for the Year Ended 31st January 2022. https://find-and-update.company-information.service.gov.uk/company/07921508/filing-history

Clearsprings Ready Homes Ltd. 2022. Clearsprings Ready Homes Ltd Annual Report and Financial Statements for the Year Ended 31st January 2023. https://find-and-update.company-information.service.gov.uk/company/07921508/filing-history

Eurodad (2024) ‘Inflated and distorted: preliminary 2023 aid figures show failure to address global challenges’. https://www.eurodad.org/aid_data_2023_statement

Grayson, J. 2020. ‘Making Profits in Hostile Environments: Asylum Accommodation Markets in the UK and Ireland’ in McGuirk, S. and Pine, A., eds. Asylum for sale: Profit and protest in the migration industry. pm Press, pp. 193-202.

Greasley, S., 2019. Mutual dependence or state dominance? Large private suppliers and the British state 2010–15. Public Administration, 97(2), pp.451-466.

Hirschler, S.A., 2021. Hostile Homes: Violence, Harm and the Marketisation of UK Asylum Housing. Springer Nature.

Independent Commission for Aid Impact. (2023) ‘UK aid to refugees in the UK: a rapid review.’ London: ICAI.

Mitchell, I. and Hughes, S. (2024) ‘The costs of hosting refugees in OECD countries and why the UK is an outlier’. https://www.cgdev.org/blog/costs-hosting-refugees-oecd-countries-and-why-uk-outlier 

Stafford, A. and Stapleton, P., 2018. Outsourcing justice?. Financial Accountability & Management, 34(4), pp.336-353.

Feb 2025