Researchers are conducting the UK’s first major scientific trials to establish whether giving homeless people cash is a more effective way of reducing poverty than traditional forms of help.

Poverty campaigners have long believed that cash transfers are the most cost-effective way of helping people, but most studies have examined schemes in developing countries.

The new study, funded by the government and carried out by King’s College London (KCL) and the homelessness charity Greater Change, will recruit 360 people in England and Wales. Half will continue to get help from frontline charities. The other half will get additional help from Greater Change, whose support workers will discuss their financial problems then pay for items such as rent deposits, outstanding debts, work equipment, white goods, furniture or new clothes. They do not make direct transfers to avoid benefits being stopped due to a cash influx.

Professor Michael Sanders, who runs KCL’s experimental government unit, said: “What we’re trying to understand is the boundary conditions for cash transfers. When does it work? For whom does it work? What are the amounts you need to give people in order to make it work?”

One of the first cash transfer schemes was in Mexico in 1997 and since then they have been used around the world. But most evidence is from low and middle-income countries, and there has been opposition from politicians and the public, who often believe people will spend the money unwisely. Last year researchers in Canada found that giving CA$7,500 (£4,285) to 50 homeless people in Vancouver was more effective than spending money housing them in shelters, and saved around CA$777 (£443) per person.

Small-scale studies have taken place in the UK, such as a scheme by the Joseph Rowntree Foundation in 2012 which helped 12 rough sleepers, but Sanders said these are believed to be the first large-scale studies. As well as the trial with Greater Change, KCL researchers are working on four other similar studies. Greater Change has helped around 1,300 rough sleepers and other homeless people in London and Essex over the last six years.

“On average, every person we help saves around £35,000 [in public spending],” Jonathan Tan, the charity’s co-founder, said. About half of their clients have been involved in the criminal justice system.

Government figures show 13% of prisoners become homeless after release, putting them at greater risk of reoffending. Some have told the Observer they re-offended in order to return to prison – the reoffending rate in England and Wales was 33.2% in 2022 for offenders released from custody or starting a court order.

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“We know that of our ex-offending cohort, who are prison leavers, fewer than 9% of them have reoffended 12 months on,” Tan said. The charity says 86% of the people it helps out of homelessness are not homeless 12 months later. The KCL study is a way of establishing whether or not that success comes from dealing with easier cases.

“We don’t think it is because they probably send us the more entrenched cases,” Tan said. “But we won’t know til the randomised control trial finishes.”