UK Scraps £2 Billion Migrant Hotel Contract Amid Fiscal Tightening

The Labour Party has cancelled a £2 billion-a-year hotel accommodation contract for asylum seekers, citing inefficiency and excessive costs, Bloomberg reports. The Home Office is ending cooperation with Stay Belvedere, which operated 51 hotels housing migrants awaiting asylum decisions. The move is part of a broader fiscal strategy aimed at reducing government spending and responding to public calls for reform in the migrant support system.

The contract, initially signed by the Conservative government, had been criticised for poor living conditions, mismanagement, and lack of financial transparency. Labour’s border security minister Angela Eagle stated in Parliament that cancelling the deal was an example of “ensuring taxpayer money is used properly.”

According to Bloomberg, the cost of housing asylum seekers in hotels reached billions annually. In 2023 alone, the Home Office spent over £4 billion on domestic migrant services—double the previous year. With these funds now being redirected to defence and other priorities, the government is looking for cheaper alternatives and will not open new migrant hotels.

Chancellor Rachel Reeves’ autumn budget left only a £9.9 billion buffer, making spending cuts inevitable. Economists suggest her choice to avoid loosening fiscal rules has created a self-imposed constraint, fuelling speculation about potential tax increases later in the year.

The cancellation of Stay Belvedere’s contract reflects growing scrutiny of lucrative government deals. The company’s parent, Theset Ltd., posted significant profits, while oversight was provided by a former Conservative MP. Labour’s decision aligns with its broader efforts to reduce public spending, including plans to cut welfare payments by £5 billion—a move facing criticism even within the party.

As the government searches for sustainable housing solutions for migrants, experts warn that real savings will require systemic policy changes. Without them, targeted cuts may only delay deeper structural issues.