She said soup runs and handouts encouraged people to sleep rough.
Calling for a radical shift in emphasis about how the homeless are treated, Louise Casey told the newspaper that charities were handing out better sleeping bags to rough sleepers than those on sale in London's best camping shops.
Her claims, which prompted a furious response from charity workers, come as rocketing house prices threaten to pitch people on to the streets in numbers not seen in a decade.
The unit will publish recommendations next month as part of proposals to reduce the number of people sleeping rough by two-thirds by 2002. At present there are thought to be around 2,000 on the streets.
'There is a sense of belonging on the streets and a feeling of safety in numbers,' said Ms Casey. 'But where there is help inside, people should not take their help on to the streets.'
The Big Issue reacted angrily to suggestions that the newspaper sold by the homeless was encouraging people on to the streets. 'I'd be horrified if anyone was saying that,' said director Sally Steinton.
The Big Issue gives people access to a legitimate income as an
alternative to begging. Many of our sellers don't even live on the streets, but in hideous hostels and bed and breakfasts.'
Bill Cochrane of the Salvation Army, which gives out clothing and sleeping bags to homeless people and plans to expand the number of soup runs it operates around the country, said: 'We have expressed our concern about the ad hoc nature of some soup runs because they are unreliable to those in real need. But as long as there are people out there on the streets, we will go to them.'
Ms Casey, a former deputy director of Shelter, said there were so many handouts being provided to homeless people around the theatreland of the Strand in London's west end that people would often give up permanent housing to return to the streets.