Big picture
The run up to Wednesday’s budget was thick with anticipation across a sector full of uncertainty about the future of much of the homelessness and rough sleeping funding. Homeless Link had been calling for urgent clarity around a rollover of existing grant funding programmes in next financial year providing the financial certainty organisations across the country need, whilst using this time to develop a more holistic, sustainable funding model that helps prevent and end homelessness for all.
The prominence of homelessness within the overall budget is certainly encouraging with Wednesday’s budget including some hugely beneficial announcements. The additional funding for homelessness and rough sleeping particularly welcome, although how much of this will find its way to frontline homelessness services remains ambiguous.
However, much of the positivity about the announcements has swiftly dissipated as organisations start calculating the impact of increased National Insurance and the living wage on services already financially stretched to breaking point.
So if you tuned into the announcements or scoured through the supporting documents and have come away scratching your head as to what this means for you and your services, you’re not alone. This blog will help you understand the facts behind the figures and give a clearer picture of what the budget means for services like yours.
Homelessness funding
- £233 million of additional spending in 2025-26 on homelessness, taking total spending to £1.0 billion in 2025-26
Rachel Reeves’ speech laid out £233m in additional funding for local authorities to prevent increases in the number of families in temporary accommodation and prevent rough sleeping. The exact mechanism that this funding will be distributed through is not yet clear so we don’t yet know if this will be a new funding stream, absorbed into existing programmes such as the Homelessness Prevention Grant or Rough Sleeping Initiative or just help plug the holes in local authority temporary accommodation overspends.
On existing funding for the sector, things are a little more complicated. With uncertainty around the continuation of existing funding programmes including RSI, RSAP and Night Shelter Transformation Fund, we were hoping for clarity on what this would look like next financial year. But whilst the budget sets out that this additional funding takes total spend on homelessness to £1billion in 2025-26 we don’t yet know how this figure will breakdown.
So what do we know? We know that there hasn’t been cuts to MHCLG’s homelessness budget, and in fact they’ve seen a £233 million increase. We also know that it is now going to be for the homelessness minister to clarify the detail of what this spend will look like in 2025/26 and within that detail will be the information needed on the future of RSI, RSAP, NSTF and other funding streams over the next year.
We had been hoping that this budget would have given us the financial certainty so desperately needed in the sector and were disappointed not to see it. Homeless Link will continue to advocate nationally for further detail as a matter of urgency.
- As one of the priority areas for reform Treasury will work with MHCLG and others in the cross-government taskforce to address homelessness and rough sleeping ahead of the spring Spending Review.
Throughout the supporting documents, Treasury speak of a two-stage fiscal process. The budget acts as Phase 1 – which ‘resets departmental budgets for 2024-25 and sets budgets for 2025-26’. In other words, government departments can expect certainty in their budgets until March 2026.
Phase 2 sets the scene for the long-term spending review, and for a wider system of reforms to the public sector and gives us some important indications of potential future funding models. This includes simplifying funding streams, moving away from competitive tendering and a shift toward multi-year settlements as well as taking a more preventative approach and devolving more power to communities. Encouragingly homelessness was one of the key priority areas across all of Government for this phase of the Spending Review. This holds huge potential for the sector and we look forward to working with government to support its implementation.
For homelessness services specifically, there is an indication of things to come: Treasury commit to work “with MHCLG and others in the cross-government taskforce to address homelessness and rough sleeping”.
The eagle eyed among you may recognise some of the above. We have called for stability for the sector into next year, followed by reforms delivered through a cross government task force, throughout our lobbying of new government. Seeing this reflected in Government’s promises represents a huge day for the sector as we move towards developing the new homelessness strategy and delivering a sustainable funding model that works for all.
We will be working hard to platform your insight and lobby for the changes we want to see through the new strategy and associated funding settlement over the next few months ahead of the Spending Review.
Additional financial pressures on services
- Increasing the employer National Insurance contributions rate of employer National Insurance contributions (NICs) from 13.8% to 15%
- Dropping the employer NIC threshold from £9,100 to £5,000
- Increasing the National Living Wage by 6.7% to £12.21p/h
We are of course supportive of all poverty alleviation measures, and the move to increase minimum wage to £12.21 p/h – or the equivalent of £23,800 FTE – will lift many families and workers further from the poverty line. However, across the sector the impact of both the increase in NICs and National Living Wage will be immense and at present there is no sign of any exemption for not for profits or even reassurance of compensating increases in commissioned contract values.
With services already facing significant financial pressures and still dealing with the challenges of years of lack of inflationary increases we know that funding for homelessness services is already falling far short of what is needed. These increased costs alongside existing pressures of reduced funding, increased demand and rising costs will cause huge strain on services, risking funding being diverted from frontline services, and adding to concerns that many providers in the homelessness sector have reached a breaking point that will lead to contracts being returned and ultimately services shutting their doors.
We have already started urgently raising significant concerns and consequences with MHCLG and will continue to do so. This issue will of course also impact civil society beyond the homelessness sector. Homeless Link is working with NCVO, ACEVO and the Charity Finance Group as part of a pan-sector response. We would encourage anyone who is concerned about the NIC and NLW increases to fill in this CFG survey and help us advocate for the sector and ensure that the government understands the scale and impact of this new financial pressure. The survey will close at midnight, Friday 15 November.
We will be sharing more information on any specific homelessness sector activity in this space so please do keep an eye out for opportunities to engage.
Some good news
- £500 million boost to the Affordable Homes Programme to build up to 5,000 additional affordable homes.
- The government will set out details of future grant investment beyond the current Affordable Homes Programme at Phase 2 of the Spending Review. Investment will run for at least the duration of this Parliament, with a focus on delivering homes for social rent.
- Reducing discounts on the Right to Buy scheme and enabling councils in England to keep all the receipts generated by sales
- Consulting on a new long-term social housing rent settlement of CPI+1% for 5 years
- £1 billion in 2025-26 to extend both the Household Support Fund (HSF) in England, and Discretionary Housing Payments (DHPs) in England and Wales.
- A new Fair Repayment Rate which caps debt repayments made through Universal Credit at 15% of the standard allowance.
The big news beyond homelessness within the budget is of course, housing! Affordable and social housebuilding has been a missing step in provision for years, and we hope that the commitment of Labour to invest in this essential infrastructure is a sign of good things to come. Similarly, the measures to improve re-investment of Right to Buy is long overdue. For accommodation providers in the sector, we hope that the move towards five-year social housing rent settlements will help provide some stability and scope for forward planning.
For people at risk of homelessness, there are some very welcome measures held within the announcement. The £1bn extension of the Household Support Fund and Discretionary Housing Payment will give some much-needed breathing space to households across the country. The cap on Universal Credit debt recovery at 15% also represents a well-overdue measure, and we congratulate our friends at JRF and the Trussell Trust for their successful campaigning to make this happen.
Outright negatives
There were a few notable absences and questions that arose from the announcements. This budget delivered only silence on Local Housing Allowance and the benefit cap. We have since had confirmation that LHA will remain at 2024/25 levels in 2025/26 and that the benefit cap will not be reviewed. We know that affordability is one of the key drivers of homelessness and that permanently unfreezing LHA, and reviewing the benefit cap to ensure everyone benefits from increase LHA rates, would be one of the single most decisive action government could take to prevent homelessness right now. The decision to maintain the previous government’s freeze is therefore hugely disappointing.
Next steps
This budget has left a lot of questions still unanswered and Homeless Link’s priority is to push for those answers as soon as possible. We will be continuing to lobby MHCLG to swiftly provide clarity of the details of funding settlements for the next financial year.
On increased costs and financial pressures on charities as a result of NICs and increased living wage we will work cross-sector to advocate for voluntary sector providers, making sure the specific issues facing homelessness services across the country are highlighted and understood by MHCLG and Treasury. And again please do complete this CFG survey to ensure that the government understands the scale and impact of this new financial pressure.
Over the coming months we will also be looking to inform phase 2 of this budget – influencing both the inter-ministerial strategy and associated funding model as set out in our spending review submission.
We will be sharing further opportunities to engage with all the advocacy and influencing work set out above so please look out for invitations to engage through our usual channels, and if you’re not already get in touch with Rob Cartridge to sign-up to our campaigns newsletter.
