The failure of two major IT projects and "ill-judged" staffing decisions have led to the loss of more than 50,000 people who cannot be found in Britain, according to a report by MPs.
The Public Accounts Committee (PAC) report reveals the Home Office is unable to track tens of thousands of people whose applications to remain in the UK have been rejected.
Some 175,000 people whose applications were unsuccessful have been placed in a "migration refusal pool" to await removal from Britain.
While some applicants may have left voluntarily, the department does not know how many remain because it lacks "a system to check departures from the UK".
In 2012, the department employed Capita to confirm the records and whereabouts of those refused permission to stay.
Capita was unable to find more than 50,000 people, with the department in some cases failing to retain even basic information such as addresses and postcodes.
The failure has been blamed in part upon a "botched" attempt by the now-defunct UK Border Agency to downgrade its caseworkers.
The report found the move led to 120 experienced caseworkers leaving the agency, adding that new staff with the "right skills" will be needed to clear the backlog.
Failures in large-scale IT projects have exacerbated the problem, leaving the department to operate with out-dated technology.
The Home Office has cancelled both the Immigration Case Work (ICW) IT programme and the ill-fated e-Borders system, which cost almost £1bn.
The report says: ""The Department had expected large-scale IT projects... to transform its processes and allow it to produce better information and substantial financial savings."
But the failure of the programmes left the department without a "comprehensive, system-wide IT strategy" to deal with asylum seekers.
"IT limitations mean the department cannot track people through the immigration system, or ensure people with no legal right to remain are removed from the UK," the report says.
"As a matter of priority, the department should identify the future IT capabilities it requires so it can develop a comprehensive, system-wide IT strategy that will deliver the required capabilities."
On Tuesday, the mayor of Calais said Britain's benefits system had become a magnet for asylum seekers making their way across the English Channel from France.
Skills Minister Nick Boles warned that Britain has lost control over immigration, and may not be able to stem movement from within the EU.
"We may never be able to control it entirely because it's a fundamental principle of the EU," Mr Boles told Total Politics.
"It will be very hard for the British people to accept that... we're going to be the net recipient of a very large amount of immigration every year," he added.
Labour's shadow immigration minister David Hanson said the Government's immigration policy is in "tatters".
He said: "The Skills Minister has admitted that the Government's grand promises have increased rather than decreased public concern.
"Yet they have still deterred the top skills and talent the economy needs. It is the worst of all worlds."
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