Funding for asylum seekers is spread across two main funding streams:

This report provides an update on the latest proposals for both funding streams.

The Hillingdon Judgment ruled that local authorities owe a duty of care under the Children (Leaving Care) Act 2000 to young asylum seekers aged 18 to 21 years (24 years if a person has both special needs and continues in education) who were previously supported by social services.

Since 2004/05, local authorities have been able to apply to the DfES for funding towards the costs of supporting young asylum seekers leaving care. In 2004/05 DfES made available £12 million to meet the costs of authorities most affected by the Hillingdon Judgment, with a further £5 million contingency fund. A DfES survey of costs was used to allocate the limited resources but this did not meet the Government's principle that requires departments to provide full funding for the cost of new burdens. For 2004/05, local authorities were expected to bear the costs of up to 44 young asylum seekers themselves. Grants were only available to authorities supporting more than 44 young asylum seekers at a flat rate of £140 per person per week.

For 2005/06, the amount available was reduced to £11 million with authorities expected to bear the costs of up to 25 young asylum seekers themselves. Grants are available for authorities supporting more than the threshold of 25 asylum seekers at a flat rate of £100 per week but the total amount of grant available nationally must not exceed £11 million.

In December 2005, London Councils and the Local Government Association agreed to conduct a joint survey of costs for supporting young asylum seekers supported under the Children (Leaving Care) Act 2000. A submission was made to Maria Eagle MP (then the responsible Minister) on 4 May 2006, and a meeting was held with Parmjit Dhanda MP, the new Minister responsible for asylum seeking children, on 19 October 2006.

The Minister asked the Chairman of London Councils and the Chairman of LGA to consider an increased threshold for 2006/07 with a higher weekly rate. While it is not yet clear whether the Minister will offer increased funding for 2006/07, the table below shows the difference in allocations for London authorities if the formula was changed back to a threshold of 44 at a rate of £140 per week. The support weeks were provided by the DfES and are provisional.

The change in formula would benefit those authorities with higher numbers of asylum seekers but other authorities, previously in receipt of the funding, would no longer be above the threshold and therefore eligible for any funding. The total funding for London would be just over £2 million higher at the £140 per week rate with a threshold of 44, but 9 London boroughs would receive reduced funding.

Members are asked to consider the proposal for a response to the Minister.

Local authorities apply to the Home Office for funding to meet the costs of supporting asylum seekers with a range of services including accommodation and social support. Grants are calculated on the basis of maximum weekly rates for unaccompanied asylum seeking children (UASC), single adults and families. The grant awarded may not meet the costs incurred by a local authority and authorities may then apply for an additional `special circumstances' grant to meet some, or all, of this funding gap.

In 2004/05, to address funding shortfalls experienced by some local authorities, London Councils and the LGA produced a joint submission to Ministers to evidence the costs of supporting asylum seekers. Tony McNulty MP, then the Home Office Minister responsible, considered the results of the survey and confirmed that special circumstances claims would be paid in full, subject to audits. However, in settling the claims last year, the Minister stated that funding for 2005/06 must not exceed the amount awarded in 2004/05.

London Councils has worked with the Home Office to finalise claims with local authorities for 2005/06. Home Office officials then put forward a proposal that would leave a total shortfall of £13.7 million in London. London Councils and the LGA made the case that any shortfalls will impact on council tax rates or local services and that the proposal was not acceptable.

The Chairman of London Councils attended an LGA asylum and refugee task group on 24 October 2006 with Liam Byrne MP, the new Minister responsible for nationality, citizenship and immigration. The Chairman raised concerns about the impact of shortfalls and the need for Government departments to work together on asylum funding.

The Home Office has now put forward an alternative proposal. Following a period of audit, the Home Office is expecting some resources back from local authorities for invalid claims. The proposal is to reinvest these savings into the special circumstances grant and reduce shortfalls in 2005/06.

The table below compares the initial and enhanced Home Office proposal for special circumstances payments in 2005/06 for adults, families and unaccompanied children combined.

The principles of the new proposal are:

The offer significantly increases the amount of asylum funding for local authorities for 2005/06. There will be an additional £11.6 million for London despite the condition set last year that funding will not increase for 2005/06. Local authorities are keen to settle this so that payments can be received. Members are recommended to agree to the proposal.