The Home Office spent £28m on an asylum centre which was never built, the National Audit Office has revealed.

The spending watchdog said the government decided to build the centre at Bicester, Oxfordshire, in 2001 as part of a attempt to speed up the handling of asylum application.

It was to be the first of 10 such centres, which would accommodate 3,000 asylum seekers from their arrival until their case had been decided.

But local opposition to the plan delayed construction and increased costs, while other initiatives to speed up the system proved successful.

This, combined with a fall in the number of people claiming asylum, meant that by 2005 the project was no longer considered economically viable.

The number of applicants seeking asylum halved between October 2002 and September 2003, the NAO said.

And it concluded some of the problems could have been foreseen if the department had worked in a "more co-ordinated and joined-up way".

Head of the NAO Sir John Bourn said: "Bicester highlights the need for departments to identify, for schemes that require planning permission, the impact of planning delays on cost and delivery using a range of scenarios."

The contract to build the centre was awarded to Global Solutions Limited, which told the department construction would cost £59.9m.

This undercut another company, UKDS, by nearly £25m.

After the project was abandoned, the Home Office paid GSL termination fees totalling £7.9m, and £7.6m for design work.

In all, £33m was spent on the project to build 10 centres, with £28m of that spent on Bicester.

Border and Immigration Agency chief executive Lin Homer said that action by the Home Office since 2002 had delivered "a significant reduction in asylum claims and a rise in the rate of removals".

"These improvements have resulted in significant savings for the UK taxpayer," she said.

"Bicester remains a valuable potential site for a secure removals centre and we continue to keep that option under review.

"We have already taken steps to expand detention facilities including a new 426-bed centre at Gatwick, which will open early in 2009."

Shadow immigration minister Damian Green said: "This is just another in the long line of Home Office disasters involving asylum and immigration.

"In this case they failed to note what was happening to asylum applications as the Balkan wars ended, and wasted taxpayers' money on an unpopular and unwanted project.

"Ministers come and go, but the Home Office disasters never end."

Liberal Democrat home affairs spokesman Nick Clegg said the government's approach to asylum was "both inhumane and incompetent".

"As thousands of asylum seekers are thrown homeless and without any meaningful support on to the streets of our towns and cities, it is grotesque that the Home Office has spent £28m on a centre that was never built," he said.