A Home Office spokesman said: “These arrangements with the private rented sector have been in place for years, including under the previous government. We have a statutory duty to support destitute asylum seekers who will not be able to pay for fees such as utilities and council tax.

“We are restoring order to the asylum system and cutting costs to taxpayers by reducing the number of people we are required to accommodate through a rapid increase in asylum decision-making and the removal of more than 24,000 people with no right to be in the UK.”

However, Chris Philp, the shadow home secretary, said: “This lays bare Labour’s shameful failures. Because they have let in record numbers of illegal immigrants so far this year, via Serco the Government is offering better than market terms to landlords to house them.

“This is taking away homes that hard-working, tax-paying Britons who are struggling to find a place to rent need. Labour is once again giving a better deal to illegal immigrants than people who have lived, worked and paid tax here all their lives. These illegal immigrants should have been sent to Rwanda, not put up in nice flats.”

But a Labour source hit back, saying: “It’s worth reminding the shadow home secretary that this has happened since 1999. This includes all of his tenure in the Home Office and the last 14 years of the Tory government.

“He well knows that Labour inherited a system in complete chaos. He had stopped making decisions and left people stranded, so more hotels were needed. Instead of harping from the sidelines, he should reflect on his mistakes.”

A Labour source also pointed out that Mr Philp himself, when a home office minister in 2020, had backed expansion of dispersal accommodation including private landlords. He urged MPs to support the approach in December 2020: “If Members want to see the use of hotels reduced, supporting the Home Office in procuring more dispersed accommodation is the way to do that,” he said.

The fresh drive has sparked a backlash from councils and charities, which have said young British workers, families and homeless people are losing out as the contractors push up the cost of housing and deny them cheaper properties.

There are an estimated 1.3 million people on social housing waiting lists amid acute shortages of cheaper private rented accommodation.