Ministers have been warned that £900m will have to be raided from UK overseas aid projects to meet the costs of supporting asylum seekers in Britain this year.

Projections seen by the Observer show that the amount of overseas aid set to be spent in the UK on refugees and asylum seekers this year is still on course to reach £3.6bn, despite a big fall in the costs of housing people from Ukraine.

The continued high spending means that without a bailout from the Treasury, ministers will have to blow a further hole in the budget for aid projects overseas. It comes amid concerns that the UK’s overseas aid spending could fall to a 20-year low.

New analysis by experts at the Center for Global Development thinktank, and shared with the Observer, shows that if no additional resources come from the Treasury, refugee spending in the UK would comprise more than 25% of this year’s overseas aid budget and require some £900m to be cut from other aid projects.

It also suggests that ministers still do not have control of the huge amounts spent by the Home Office on asylum costs in the UK. The latest data suggests that there are still about 30,000 asylum seekers in hotel rooms, although the total has fallen from its peak.

Analysis suggests that Britain spends vastly more of its aid budget on hosting refugees and asylum seekers than any other rich country: about £20,000 per person, according to the thinktank’s researchers. That is more than 30% higher than Ireland and 150% higher than the next G7 country, Canada.

Questions have already been raised around the value of contracts awarded for housing asylum seekers. Sir Mark Lowcock, the ex-UN official who was the most senior civil servant in the former Department for International Development (DfID), told the Observer recently that a further forensic analysis of the deals should take place.

About £4.3bn of the UK aid budget was spent inside the UK in 2023 to support asylum seekers and refugees, more than a quarter of the entire overseas development aid (ODA) budget and about four times the amount spent on humanitarian support.

The previous Conservative government gave a further £2bn over two years for the UK aid budget for 2022-23 and 2023-24 to help cover the huge extra refugee costs spent by the Home Office. However, no further cash injection has been announced by Labour. The previous extra funding expired in April.

The new research finds that the government is very unlikely to reduce aid spending on the issue in 2024. The only fall this year is coming from the decline in arrivals of Ukraine scheme visa-holders, with their costs set to fall from more than £1bn in 2022 and 2023 to £300m. The amount allocated to supporting asylum seekers will remain high and almost the same as last year, at about £3bn.

“Rishi Sunak set a precedent as chancellor by allowing other departments to claw back whatever they could from the aid budget— the pot of money meant to support the world’s poorest,” said Ian Mitchell, a senior policy fellow at the thinktank and one of the authors of the spending projections. “This has included the Home Office’s spiralling costs for hosting refugees within the UK. As a result, the UK’s real foreign aid spending has become smaller, unreliable, and less responsive. If this policy isn’t corrected – if, for example, the £2bn emergency fund provided by the last government isn’t matched – our aid spend could drop to a 20-year low. Prime minister Starmer pledged at the UN to restore the UK’s role as a responsible global leader, but continuing down this path is about as far from that promise as you can get.”

Under international rules, countries can use their aid budgets for the costs of asylum seekers within their countries until a year after their arrival. While official advice is for countries to take a “conservative approach” to these costs, Britain has maxed out its aid spending on housing and supporting refugees. Home Office data suggests average hotel costs for asylum seekers were at £140 per person per night in February, or £51,000 per year.

On Britain’s high spending on refugees and asylum seekers in the UK, the government said: “This government is determined to restore order to the asylum system so that it operates swiftly, fairly and in the interest of taxpayers. We will not be taking the costly migration and economic partnership with Rwanda forward, and we are taking immediate action to clear the asylum backlog and reduce the use of expensive hotels.”