Benefits System Reforms Will Lead to Rise in Homelessness, Charities Say

The government is already under pressure over access to other benefits, namely the two-child Universal Credit limit and the winter fuel allowance for seniors.

File photo of a homeless person sleeping rough in a doorway on Feb. 7, 2017. Yui Mok/PA Wire

The government’s proposed welfare reforms will increase homelessness, push people further away from the labour market, and add extra pressure on already-stretched statutory services, major charities have said.

Homeless charities St. Mungo’s and Shelter are among those who have written to Work and Pensions Secretary Liz Kendall to raise concerns over plans to restrict eligibility for personal independence payments (PIPs) and cut the sickness-related element of Universal Credit.

The charities said in the open letter to the minister published on Friday said that while they support the government’s ambition to ensure people on sickness benefits have the opportunity to get back to work, as a sector, they cannot support the measures outlined in the government’s “Pathways to Work” green paper.

They said, “We can only conclude that the proposed changes will increase the number of people at risk of becoming homeless for the first time, increase the number of people we have helped resolve their homelessness fall back into it and increase the length of time it takes to resolve people’s homelessness in the future.”

The signatories said that these increases in homelessness will have a “catastrophic impact” on mental and physical health, as well as employment and education opportunities.

They added that statutory services for helping the homeless will be put under even greater strain, with a further rise in homelessness having a “domino effect of imposing a significant financial cost to the state, as it will need to pay for more temporary accommodation and emergency homelessness services.”

Benefits Bill to Hit £70 Billion

The proposals come amid the rising cost of benefits, which is predicted to hit £70 billion a year by the end of this decade.

There are around 2.8 million people who are economically inactive owing to long-term sickness. This is one of the highest rates in the G7, with the UK the only major economy whose employment rate has not recovered since the COVID-19 pandemic era.

The PIP figures are also growing, with 3.66 million people entitled to the benefit as of January 2025, up 12 percent on the year before and 71 percent higher than January 2020, before the start of lockdowns.

Kendall set out the proposed reforms earlier this year. She said the changes will give people on long-term sick and disability benefits “locked out of work” the chance to reenter the job market and save the taxpayer £5 billion a year.

Eligibility for entitlement for PIPs, which is the main disability benefit used to help cover the extra costs of living with a condition or disability, will be tightened so that they will only be targeted to those with higher needs.

The Department for Work and Pensions (DWP) will also reintroduce reassessments for those on incapacity benefits, with the exception of those whose conditions mean they will never improve.

Jobseekers will have a “right to try” guarantee, meaning that someone on the path to returning to work or trying to work will not immediately have their benefits reassessed.

However, the DWP’s impact assessment on the changes estimates that an additional 250,000 people (including 50,000 children) will be in relative poverty by 2030 as a result of the changes to social security.

Secretary of State for Work and Pensions Liz Kendall arrives to attend the weekly Cabinet meeting at Downing Street in London, on Nov. 26, 2024. Leon Neal/Getty Images

Vote Next Week

Responding to the charities’ report, a government spokesperson said, “We will never compromise on protecting people who need our support, and our reforms will mean the social security system will always be there for those who will never be able to work.”

The spokesperson also highlighted the government’s £1 billion scheme to help the long-term sick or disabled “out of poverty and into good, secure jobs.”

“We have also raised the national living wage, increased benefits, and given additional help to the poorest households, as part of our Plan for Change,” the spokesperson added.

The government’s “Pathways to Work” green paper will be voted on in parliament next week and though likely to pass, has already seen opposition from within the Labour Party.

This includes from Mother of the House Diane Abbott, who wrote on social media platform X earlier this month: “Cutting disabled people’s benefits isn’t about helping them into employment, it is about balancing the books on their backs. Ministers’ talk of getting disabled people into work is a fig leaf.”

The Labour government has also faced renewed pressure to lift the two-child limit for Universal Credit and expand the winter fuel allowance. The government has recently said ending the two-child cap has not been ruled out, while Prime Minister Sir Keir Starmer has indicated he is considering making more pensioners eligible for the fuel benefit.

PA Media contributed to this report.