Senior Tories welcomed the move, but insisted it is only the “first step”, adding that ministers must close every migrant hotel.

Ms Mahmood also claimed the cost of migrant hotels has fallen by £700m since Labour won the General Election.

Accommodation providers had previously told Parliament they would be returning some profits to the government, under the terms of their contracts.

Dame Karen Bradley, the Conservative chair of the home affairs select committee, said the recovery was “welcome” but only a “first step”.

She added: “This is only a small part of the many billions that the contracts have and will cost.

“The government must now set out its long term plan for how it will deliver a resilient and cost effective asylum accommodation system.”

Conservative Shadow Home Secretary Chris Philp said: “The only way to end this crisis is to end the use of hotels altogether.

“The Home office is spending £5.77m per day on asylum hotels, meaning these savings will disappear in just 12 days.

“The truth is the Labour government is accommodating more illegal immigrants in hotels than at the election, and the first nine months of this year have been the worst in history for illegal immigrants crossing the Channel.”

“Only the Conservative Party has a serious, hard-edged plan to take control of our borders.”

Costs for migrant hotels have fallen by £700 million over the past 12 months, Ms Mahmood insisted.

She said: “This Government inherited asylum hotel contracts that were not delivering good value for taxpayers’ money.

“We have already saved £700 million in hotel costs. Now we are recouping millions more in excess profits.

“And by the end of this parliament, we will have closed every asylum hotel.”

A scathing report by the Home Affairs Select Committee found that billions had been squandered on asylum hotels.

MPs slammed the department’s “incompetence”, adding that it failed to “get a grip” of a “chaotic and expensive” system.

This allowed firms to make “excessive profits” from the Channel migrant crisis.

The Home Office in 2019 signed 10-year contracts with the three companies to provide asylum accommodation across the UK. They were supposed to have cost taxpayers £4.5 billion, but officials believe it could now hit £15.3bn.

Serco holds the contracts for the North West, Midlands and the East of England, Clearsprings operates in the South and Wales; and Mears covers Yorkshire and the Humber, the North East, Scotland and Northern Ireland

Migrant hotels cost the taxpayer an average of £144.98 per person per night compared with just £23.25 for dispersal accommodation.

And more than 90% of councils will be housing asylum seekers by the end of this year, the Express revealed.

Almost 40,000 people are set to be given taxpayer-funded homes in London, the East of England, South East England, and South West England as ministers ramp up efforts to close migrant hotels.

In total, the Home Office needs to find dispersal accommodation for more than 66,000 asylum seekers. And current plans only allow for enough space for another 46,640, creating a shortfall of almost 20,000.

The Home Office is exploring the use of military bases and abandoned properties to prevent hotels being taken over.

But the number of cash-strapped local authorities housing asylum seekers has increased from 82% in the Summer and is projected to hit 92% “by the year’s end”.

Service User Demand Plans drawn up by the Home Office set out how many migrants can be housed in each region.

Some 13,486 people are supposed to living in dispersal accommodation – houses, flats and bedsits – in North West England.

But Home Office records show 17,218 are living in taxpayer-funded homes in towns and cities across the region and officials still need to find homes for 1,809 people.

By contrast, asylum accommodation providers are hunting for space for 12,032 migrants in South-East England. But 3,118 are already living there and the plan only allows for 14,092.

Another 12,206 need to be accommodated in London, the document sent to the Home Affairs Select Committee revealed.

Five of the 12 regions are yet to hit 50% of their targets on moving people into dispersal accommodation.

Yet the Home Office is so overwhelmed nationally that it is facing a shortfall of almost 20,000 beds for asylum seekers.

The Service User Demand Plans allocated 114,791 spaces for asylum seekers across the country.

Some 68,151 have already been housed, with another 66,021 waiting for accommodation. The North East of England and the North West have both surged past their targets but need to find additional homes for 2,000 people between them.

The West Midlands will almost certainly soar over its planned amount, with 10,944 supposed to be housed in the region. But 9,086 are already living there and 4,930 more are waiting in the wings.