The number of people sleeping rough has fallen significantly, although many thousands of people are still living in temporary accomodation, it emerged on Monday.

According the the Rough Sleepers Unit, number of people sleeping on the streets in England has fallen by two thirds to just over 500.

However, homelessness charities are arguing that hundreds of thousands of "hidden homeless" remain in bed and breakfast accommodation.

The latest figures from the Rough Sleepers Unit reveal that the number of homeless sleeping on the streets has been fallen by 71 per cent since 1998 - beating a government target by six months.

In the winter of 1998, 1850 people were sleeping on England's streets. This year the numbers have been cut to 530 - a turnaround welcomed by Tony Blair on Monday.

"Two years ago we set ourselves the tough target of bringing down the number of rough sleepers by two-thirds in three years," said the prime minister. "We can be proud that today, thanks to the vision, dedication and hard work of many people, thousands of former rough sleepers are now rebuilding their lives. But we must not be complacent. These people, and the vulnerable people who are still choosing to sleep rough even though beds are available for them, will continue to need practical help."

Blair met former rough sleepers now in full-time employment as the housing minister, Lord Falconer, announced that the government planned to expand initiatives to tackle wider problems of homelessness.

"We must also look at helping those who may have a roof over their heads but are nevertheless without a home," said Lord Falconer. "A new Homelessness Directorate will bring together and invigorate existing work to help homeless people, as well as develop new work to help prevent homelessness, and investigate its underlying causes."

The Homelessness charity, Crisis, countered the success with the launch of a campaign highlighting the plight of Britain's 400,000 "hidden homeless" - revealing that 95 per cent of the country's homeless are in temporary accommodation. The charity says the group is often left isolated with little hope of finding somewhere to call their home.

Crisis argues that the government has not done enough to help these people because unlike the high profile street homeless those in bed and breakfasts are "invisible".

"The fact that the majority of them are hidden from view does not make them any less vulnerable than those people sleeping rough tonight," said Crisis chief, Shaks Ghosh.

The organisation believes the main issue is being overlooked by government, pointing out that local authorities are expected to turn away an estimated 140,000 homeless people who have come to them for housing.

Giving a cautious welcome to the new unit, Shelter director, Chris Holmes said he had "big hopes" for its work.

"Priority must be given to reducing the use of temporary accommodation for homeless people - particularly for those enduring the misery of bed and breakfast accommodation - and to strengthening preventative measures for single people who risk becoming homeless," he said.However, some predict that ministers may find the wider problem of homelessness more financially and ideologically intractable.

In 2000, a total of 172,760 households were registered as homeless by local authorities, estimated to represent a problem facing over 410,000 people.

Over 75,000 households in March 2001 were living in temporary accommodation - with 10,830 in bed and breakfast "hotels".

Rent for council tenants has doubled from £23.70 to £44 in the 10 years since 1990. Over the period, rents in the private sector have rocketed by 90 per cent.

Average house prices have risen from £61,000 in 1995 to £106,450 in 2000 - an increase of 75 per cent.

As housing costs have soared investment in housing has fallen from £9.037 billion in 1990/1991 to £5.61 billion in 1999/2000.

Despite a government decree that 3.8 million new homes are needed in the next 15 years, fewer homes are being built than in any peacetime year since the 1920s.

In 2000, only 175,000 new homes were started and figures from the National House Building Council showed new starts falling in the first half of 2001.

Shelter believes that just by scratching at the surface the government's initiatives can "only go so far" and argues that to really get to grips with the problem the government needs a 10-year plan for the provision of affordable housing "with resources directed at the areas where housing pressures are the greatest".

"To achieve this an additional 100,000 affordable homes are needed each year for 10 years. This equals an increase in spending of a further £1.3 billion above the level of funding for 2003/2004," says Shelter's Emmeline Sharp.