Labour’s bid to end homelessness hit by Budget tax blow, Rachel Reeves warned

Homelessness organisations have warned Rachel Reeves that crucial services are under threat following a tax hike in her Budget.

In an urgent letter, seen by The Independent, they have appealed to the chancellor to extend a carve-out for the NHS and public sector to those who help some of the most vulnerable in society.

A £25bn rise in employers’ national insurance contributions could take between £50m and £60m a year out of frontline services for the homeless, the sector estimates.

The letter has been signed by more than 100 high-profile organisations including Crisis, St Mungo’s and Depaul UK, the youth homelessness charity.

Earlier this year figures showed that rough sleeping in London had hit a record high, with a total of 11,993 people sleeping on the streets of the capital in the year to March.

Two months later, in August, the revelation that there were more than 150,000 children living in temporary accommodation, another record high, prompted calls for more action to address what the government has acknowledged is a “national scandal”.

The new Labour administration has also warned that the country faces the “most acute housing crisis in living memory”.

Rick Henderson, chief executive of Homeless Link, the national body for frontline homelessness organisations, said: “We are desperately worried that homelessness services across the country will face closure, leaving thousands of people without the support they need. The system is already at breaking point with financial pressures and soaring demand. This NI increase, if not recovered in some way, could be the final nail in the coffin.”

Many homelessness services are commissioned by local government from not-for-profit organisations. These provide everything from street outreach to emergency beds and counselling and are set to be hit by the tax hike.

The letter warns the NI rise will “have an immediate detrimental impact on the lives of the thousands of people who are supported and accommodated on a daily basis helping them move on from the worst forms of homelessness and rebuild their lives”.

The group said that it welcomed the prominence of homelessness within the budget, in particular an additional investment of £230m towards ending homelessness and rough sleeping.

But the tax changes risk hurting “our ability to prevent and end homelessness”, they added.

In its election manifesto, Labour said it would “develop a new cross-government strategy, working with mayors and councils across the country, to put Britain back on track to ending homelessness”.

The NI changes were announced by Ms Reeves in her Budget at the end of October and will require employers to pay national insurance contributions at a rate of 15 per cent, up from 13.8 per cent. Businesses will also have to start paying national insurance on staff who earn more than £5,000 a year, down from what had been £9,100.

A government spokesperson said: “We have inherited devastating levels of homelessness, and we are taking action to get back on track to end this issue for good, which is why in the Budget we took the total spending on reducing homelessness to nearly £1bn in 2025-26.

“Reducing social inequalities is also vital to fix this problem. Our balanced and proportionate approach will help us raise the money needed to fix public services so that they can benefit everyone, as well as fund the delivery of up to 5000 social homes.”