Labour wants to cut benefit spending. Here's how giving people free cash could save money instead

Every year, thousands of young people age out of the care system in England – and for many, the transition is brutal. Unlike most young people leaving home, they do so abruptly, often at 18, without a family safety net to catch them if things go wrong.

Within two years, around a third will become homeless. They are vastly overrepresented in our prisons, our mental health services, our unemployment statistics. In short, many are experiencing poverty – and facing everything comes with it.  

The question isn’t whether we need to do better by them. It’s how. One solution, increasingly discussed as a way to tackle poverty more broadly, is strikingly simple: just give them money. Without strings attached, and without conditionality and intensive monitoring to ensure recipients’ worthiness. 

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In theory, it’s a simpler and more efficient approach – one that restores dignity and agency while potentially supporting better life outcomes. But it’s not without controversy: critics of these kinds of cash transfer interventions argue the money would be misspent, or that it would discourage employment. These are legitimate concerns. Now, for the first time, we have actual evidence from the UK that can help assess these claims and determine the effects. 

In a landmark study, funded by the Centre for Homelessness Impact and the Cabinet Office, our team at King’s College London’s Policy Institute ran the first trial of its kind, involving 302 young care leavers, across nine areas in England. Of these, 99 were allocated to receive a one-off cash transfer of £2,000, put straight into their bank account without restrictions on how they could spend it.  

We then followed them up, at six months, and then again at 12 months. The findings are certainly encouraging: an eight percentage-point rise in stable housing; a six percentage-point reduction in sofa-surfing. More use of GPs, and fewer overnight stays in hospital. Fewer arrests, higher wellbeing. With varying levels of statistical confidence, the study found consistently positive results over the 12 months, across all the things we hoped to change.  

And what about the things we feared would change? Again, the results are encouraging. There’s no change in the likelihood of being in paid work, and there was less, not more spending on alcohol, tobacco and drugs among the young people who received the funding. It turns out, if we trust people, they behave in a trustworthy way.  

This is just the first of several studies, which we’re working on as part of King’s College London’s new “Cash Lab”, trying to find the best ways to use cash – who to give it to, how much to give, and when to give it – and so this is an important milestone on a longer road for us.  

However, from this single study (as well as others elsewhere in the world with similar findings, like Canada and Ireland) there are already clear implications that speak directly to one of the central ambitions of this government.  

Keir Starmer came to power promising to end what he called “sticking plaster politics” – the tendency of successive governments to manage crises as they arise rather than addressing the conditions that create them. His Plan for Change committed to breaking down Whitehall silos, to longer-term thinking, and to organising government around outcomes rather than departmental boundaries.

Wes Streeting has made the same argument about health specifically, warning that when public services fail to coordinate, “the public pays twice: in money and in misery”. These are the right instincts. But as the Institute for Government has noted, so far delivery has been behind the rhetoric. 

Our findings suggest what that joined-up approach could actually look like. A one-off cash transfer of £2,000 to a care leaver produced measurable improvements across housing, health, employment, and criminal justice all at once, from a single intervention. That is not how the British state currently operates. It operates through separate departments, separate budgets, and separate definitions of success.

The Department for Education does not get credit when a young person secures stable housing. The Ministry of Justice does not benefit when someone avoids an arrest. The result is that no one department has a strong incentive to make the investment that prevents the crisis appearing in someone else’s budget. 

But the immediate implication is for how we think about the benefits system. The dominant approach to welfare reform in recent decades – across governments of both parties – has been to reduce generosity or pile on conditionality, sanctions, and monitoring. The assumption is that people need to be nudged, incentivised, or compelled into better choices.  

Our evidence cuts against that assumption directly: trusted with money and no conditions attached, the young people in our trial made choices that reduced their demand on crisis services across the board. A more humane approach turns out, on the available evidence, to be a more efficient one too. 

Professor Michael Sanders is director of the experimental government team in the Policy Institute at King’s College London.

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