Breathing room or big ambitions? The Budget 2026, explained
This Wednesday’s budget provided the first big fiscal event of Andy Burnham’s premiership. The widely discussed “breathing space” budget is designed to relax costs for households as we stand on the edge of another cost of living crisis. But alongside the headline-grabbing “everyday fixes”, we have also seen movement on the ambition to end homelessness. With the Chancellor outlining the Government’s spending priorities, are we finally seeing Number 10 putting money where their mouth is?
Homelessness spending: A generational investment in rough sleeping
By the time that the Chancellor took the floor on Wednesday, we already knew about the doubled investment in homelessness funding that would be outlined in the budget. It feels important to start by acknowledging how seismic this is: it has been many years since our sector has been so prominent on Treasury’s agenda. The promised £432 million in additional investment across 2027-2029 shows a future for the Rough Sleeping Programme beyond the initial Christmas deadline. We will continue to work with you to influence Government as they put meat on the bones of that plan.
Also included in the Treasury’s announcements was the renewed commitment to deliver a Value for Money (VfM) review into homelessness spending.
This is a huge policy win for us, as we had heard little about the future of the VfM after it was initially promised under Starmer’s leadership. The VfM represents an opportunity for Government to review and improve the foundations on which our sector is built. Importantly, we have also heard that the review will include “supported housing delivery models” – indicating that our calls for Voluntary, Charitable and Faith Sector (VCFS) provisions to be included in its scope have been heard.
While not directly focused on homelessness per se, the decision to deliver £1.5bn extra funding to build social rent homes is inevitably a positive for our sector. Interestingly, the Government have specifically stated that they are prioritising council housebuilding – which, at risk of sounding too policy-wonkish, formally introduces a shift in terminology which should raise some exciting questions about the direction of travel within this government.
The best of the rest: benefit tapers, electricity taxes, and pickle tariffs
Alongside the homelessness-specific headlines, we have also heard about various new measures to reduce the impact of rising costs for households across the country. These range from the minute (goodbye, gherkin tariffs) to the welcome (hello, £100 energy payments) and the long-overdue (auf wiedersehen, gas standing charges). We are also pleased to see cuts to VAT on electricity, reducing the risk that essential costs will become unmanageable for people on low incomes over the winter.
Particularly welcome is the increased flexibility for working carers in receipt of Carer’s Allowance. Similarly to recent changes in Housing Benefit, working carers will now be subject to a tapered earnings limit rather than the steep cliff edge in support that had seen unpaid carers pushed into poverty. This is a celebrated change for an often-overlooked group and a positive sign of the Government’s approach to those who are too often left in the socioeconomic margins.
Important for the sector: a boost for the workforce
In addition to the above headlines, there are a couple of key changes which will impact on our services and workforce. First is the increase to tax-free mileage rates, which permanently rise to 55p per mile for the first 10,000 miles. This has come after years of campaigning from worker’s rights organisations and should mean more money in the pockets of your workforce to reduce the impact of rising fuel costs.
Second here is the rise in National Living Wage, which will increase by 3.9% to £13.21 per hour in 2026/27. This translates to an annual salary of £27,476 based on a 40-hour work week. While we know this will make a huge difference to many low income households, we recognise that this may dilute previously competitive salaries. We also appreciate that this is another in a long line of costs which our sector has been expected to absorb into overstretched and often static commissioned budgets, without assurances that contracts will be uplifted to meet the extra cost.
Missed opportunities: what’s hiding between the lines?
While on the face of it the budget is without any outright negative decisions for the sector, there are certain omissions which we are disappointed by. The continued failure to unfreeze LHA rates means the cost of private rents continue to outstrip welfare income. We also note that no further funding has been made available for homelessness providers impacted by the cost of compliance with new regulations – an omission which providers are likely to feel the squeeze of as Supported Housing (Regulatory Oversight) Act 2023 implementation takes force in the coming months.
Finally, we have heard precious little about the mysterious “national housing first philosophy” and how this could or should shape spending. This also means no further funding to deliver capital-H-capital-F Housing First, a missed strategic opportunity when introducing a tranche of new longer-term spending for the sector.
More change to come: prevention and the obligatory devolution addendum
Interestingly the Treasury took the opportunity of the budget to re-state their commitment to prevention-led approaches across government. Here, the Government identify the need for “greater emphasis on early intervention” to “yield benefits in the long term and help to address the drivers of poor outcomes and cost”. To achieve this, they have trailed the introduction of a new category of ringfenced spending into the Spending Review 2027, which will be known as preventative DEL (PDEL). It is likely that the Rough Sleeping Programme will be included in the first round of PDEL ringfencing, but details on exactly what this means will have to wait until next year.
We have also seen devolution further presented as the panacea for the country’s ills. The budget outlines a Fiscal Devolution Roadmap which gives detail on a new funding model for regional and local government through various taxes, income streams and levies. While this could lead to positive change locally, we remain cautious about the risks involved in introducing further layers of local government bureaucracy and of what this means for the significant proportion of the country not currently subject to devolution arrangements. Regardless, it seems the wheels of devolution are firmly in motion and we will continue to monitor what this will mean for services like yours.
Finally, a couple of items have been kicked into next year, including findings from both the Milburn and Timms review. We know both of these are likely to impact on people at risk of or experiencing homelessness and we will continue to monitor and update on any outcomes.
In summary: we have the words and the budget, but the real work starts now
Overall, the budget is largely good news for the sector. It offers funding and prioritisation for homelessness services at a level we have rarely seen, as well as extra security for households through what is likely to be a difficult winter.
The budget announcements are also set against the backdrop of rapid mobilisation of the Rough Sleeping Programme. While the announcement of additional funding gives some much-needed assurances on the long-term commitment to ending homelessness, it is now up to the Government to ensure it is spent on a programme that works.
This is a very fast moving time in the policy world and we would love to hear from you. To update us about the Rough Sleeping Programme in your area, please complete our monitoring form or attend one of our regular policy drop ins.
If you would like to keep in touch about our policy and campaigns work more generally, sign up to our campaigns newsletter here.
