Watchdog blames ‘woeful budgeting’ for asylum overspend by Home Office
“Woeful budgeting” by the Home Office has led to years of overspend on asylum, a watchdog has claimed.
For the past three years, the department has set £110m aside for asylum operations. But a new report from the Institute for Fiscal Studies (IFS) said the actual spend had averaged £2.6bn a year in that time.
Research economist for the watchdog Max Warner said going over budget was “entirely understandable” when there was “a one-off unexpected spike in costs or demand”.
But, he added: “When it is happening year after year, something is going wrong with the budgeting process.”
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The IFS accused the Home Office of getting into the “bad habit” of submitting its initial budgets to parliament at the start of the year knowing full well the funds wouldn’t cover what was needed, instead relying on additional money from the Treasury’s reserve fund – a top-up that last year amounted to an extra £4bn.
And it claimed the new government was making the same mistakes again, saying it was submitting figures it “knows to be insufficient”, and was already writing in a Treasury top-up of £1.5bn – with another of £4bn judged by the watchdog to be “all but inevitable”.
The IFS put the budgeting issues at the heart of the disagreement between former Tory chancellor Jeremy Hunt and his Labour successor Rachel Reeves shortly after she took office.
Ms Reeves accused Mr Hunt of lying over the state of the UK’s finances, saying there was a £22bn “black hole” in funding – including the need to spend £6.4bn on asylum and illegal migration in 2024/25.
He rejected that claim, saying it contradicted the budgets he had presented to parliament and that were signed off by civil servants, and insisting the figures were there to see before she became chancellor.
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‘Hunt lied over state of public finances’
The watchdog said both politicians had a point, but only because the Home Office and the Treasury were continuing “poor budgeting practice” that “leaves a lot to be desired”.
It said Ms Reeves was right to point out the lack of budgeting for asylum pressures by the previous government – though she “perhaps overstates the extent to which this was unforeseeable and unexpected”.
And while Mr Hunt had a right to question the budget estimates presented to parliament by Labour and if they were enough, it was the same case when he was chancellor the previous year.
Responding to the report, a Labour spokesperson reiterated their attack on the previous Tory administration, saying they had “covered up the true extent of the crisis and its spending implications, leaving behind an unforgivable inheritance with nothing to show for it except record high small boat crossings in the first half of the year”.
The spokesperson added: “Every time the Conservatives faced a difficult problem, they failed to be honest. They knowingly overspent on departmental budgets, covered it up, called an election and ran away from the problem, leaving a £22bn black hole in the country’s finances for Labour to clean up.
“The Labour government has already begun the difficult work to clean up this mess and deliver an asylum system that is controlled, managed, and works for Britain.”
Shadow home secretary James Cleverly said: “Border control has never been free.
“By scrapping our deterrent on day one of a Labour government, the asylum bill will soar for taxpayers under Keir Starmer’s government.
“The government must urgently come forward with a plan to stop illegal boat crossings and end the use of expensive hotels to manage down costs within the asylum system.”
The report comes amid growing speculation around tax rises when Ms Reeves delivers her first budget on 30 October.
Speaking on Tuesday, Prime Minister Sir Keir Starmer warned of “painful” decisions to come in order to “fix the foundations” of the UK economy.
It is not yet clear where the axe may fall, but speaking to reporters on Wednesday, the chancellor refused to rule out rises to inheritance or capital gains taxes.
Panama’s capital city will accept cryptocurrency payments for taxes and municipal fees, including bus tickets and permits, Panama City mayor Mayer Mizrachi announced on April 15, joining a growing list of jurisdictions globally that have voted to accept such payments.
Panama City will begin accepting Bitcoin (BTC), Ether (ETH), Circle’s USDC (USDC), and Tether’s USDt (USDT) stablecoin for payment once the crypto-to-fiat payment rails are established, Mizrachi posted on the X platform.
Mizrachi said previous administrations attempted to push through similar legislation but failed to overcome stipulations requiring the local government to accept funds denominated in US dollars.
In a translated statement, the Panama City mayor said that the local government partnered with a bank that will immediately convert any digital assets received into US dollars, allowing the municipality to accept crypto without introducing new legislation.
Panama City joins a growing list of global jurisdictions on the municipal and state level accepting cryptocurrency payments for taxes, exploring Bitcoin strategic reserves to protect public treasuries from inflation and passing pro-crypto policies to attract investment.
Related: New York bill proposes legalizing Bitcoin, crypto for state payments
Municipalities and states embrace digital assets
Several municipalities and territories around the globe already accept crypto for tax payments or are exploring various implementations of blockchain technology for government spending.
The US state of Colorado started accepting crypto payments for taxes in September 2022. Much like Panama City said it will do, Colorado immediately converts the crypto to fiat.
In December 2023, the city of Lugano, Switzerland, announced taxes and city fees could be paid in Bitcoin, which was one of the developments that earned it the reputation of being a globally recognized Bitcoin city.
The city council of Vancouver, Canada, passed a motion to become “Bitcoin-friendly city” in December 2024. As part of that motion, the Vancouver local government will explore integrating BTC into the financial system, including tax payments.
North Carolina lawmaker Neal Jackson introduced legislation titled “The North Carolina Digital Asset Freedom Act” on April 10. If passed, the bill will recognize cryptocurrencies as an official form of payment that can be used to pay taxes.
Magazine: Crypto City: The ultimate guide to Miami
As digital assets gain mainstream adoption, establishing a legal framework for stablecoins is a “good idea,” said US Federal Reserve Chair Jerome Powell.
In an April 16 panel at the Economic Club of Chicago, Powell commented on the evolution of the cryptocurrency industry, which has delivered a consumer use case that “could have wide appeal” following a difficult “wave of failures and frauds,” he said.
Powell delivers remarks at the Economic Club of Chicago. Source: Bloomberg Television
During crypto’s difficult years, which culminated in 2022 and 2023 with several high-profile business failures, the Fed “worked with Congress to try to get a […] legal framework for stablecoins, which would have been a nice place to start,” said Powell. “We were not successful.”
“I think that the climate is changing and you’re moving into more mainstreaming of that whole sector, so Congress is again looking […] at a legal framework for stablecoins,” he said.
“Depending on what’s in it, that’s a good idea. We need that. There isn’t one now,” said Powell.
This isn’t the first time Powell acknowledged the need for stablecoin legislation. In June 2023, the Fed boss told the House Financial Services Committee that stablecoins were “a form of money” that requires “robust” federal oversight.
Related: Stablecoins are the best way to ensure US dollar dominance — Web3 CEO
Support for stablecoin legislation is growing
The election of US President Donald Trump has ushered in a new era of pro-crypto appointments and policy shifts that could make America a digital asset superpower.
Washington’s formal embrace of cryptocurrency began earlier this year when Trump established the President’s Council of Advisers on Digital Assets, with Bo Hines as the executive director.
Hines told a digital asset summit in New York last month that a comprehensive stablecoin bill was a top priority for the current administration. After the Senate Banking Committee passed the GENIUS Act, a final stablecoin bill could arrive at the president’s desk “in the next two months,” said Hines.
Bo Hines (right) speaks of “imminent” stablecoin legislation at the Digital Asset Summit on March 18. Source: Cointelegraph
Stablecoins pegged to the US dollar are by far the most popular tokens used for remittances and cryptocurrency trading.
The combined value of all stablecoins is currently $227 billion, according to RWA.xyz. The dollar-pegged USDC (USDC) and USDt (USDT) account for more than 88% of the total market.
Magazine: Unstablecoins: Depegging, bank runs and other risks loom
An appellate court has granted a joint request from Ripple Labs and the Securities and Exchange Commission (SEC) to pause an appeal in a 2020 SEC case against Ripple amid settlement negotiations.
In an April 16 filing in the US Court of Appeals for the Second Circuit, the court approved a joint SEC-Ripple motion to hold the appeal in abeyance — temporarily pausing the case — for 60 days. As part of the order, the SEC is expected to file a status report by June 15.
The SEC’s case against Ripple and its executives, filed in December 2020, was expected to begin winding down after Ripple CEO Brad Garlinghouse announced on March 19 that the commission would be dropping its appeal against the blockchain firm. A federal court found Ripple liable for $125 million in an August ruling, resulting in both the SEC and blockchain firm filing an appeal and cross-appeal, respectively.
However, once US President Donald Trump took office and leadership of the SEC moved from former chair Gary Gensler to acting chair Mark Uyeda, the commission began dropping multiple enforcement cases against crypto firms in a seeming political shift. Ripple pledged $5 million in XRP to Trump’s inauguration fund, and Garlinghouse and chief legal officer Stuart Alderoty attended events supporting the US president.
Related: SEC dropping Ripple case is ‘final exclamation mark’ that XRP is not a security — John Deaton
Despite support for the end of the case coming from both Ripple and the SEC, the August 2024 judgment and appellate cases leave some legal entanglements. Alderoty said in March that Ripple would drop its cross-appeal with the SEC and receive a roughly $75 million refund from the lower court judgment. It’s unclear what else may result from negotiations over a settlement in appellate court.
New leadership at SEC incoming
Acting chair Uyeda is expected to step down following the US Senate confirming Paul Atkins as SEC chair on April 9.
During his confirmation hearings, lawmakers questioned Atkins about his ties to crypto, which could create conflicts of interest in his role regulating the industry. In financial disclosures, Atkins stated he had millions of dollars in assets through stakes in crypto firms, including Securitize, Pontoro and Patomak.
Magazine: SEC’s U-turn on crypto leaves key questions unanswered
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