Government action on homelessness is pretty shitty, and it's hard to deny that. Whether it's from the perspective of the hardliners who just want to clean up their streets, or from the perspective of those who just want to help these people, it pretty much fails on both fronts. Homelessness may be down from its peak in the Blair years, but it's been steadily going up since 2010. The 2016 Homelessness Reduction Bill is admirable in its aims, and indeed reducing the timescale in which local authorities can act is fair enough, but the amount of funding given to reducing homelessness across the UK is pocket change.
In my own opinion, the government should work with local authorities and charities (local, national and international alike) to revamp the UK's approach towards homelessness. Utilise the money currently in circulation -- and, if needed, more money -- to purchase easy-to-construct homes (shipping containers, cheap caravans, etc.) so as to create drug-free and alcohol-free areas that the homeless can access and receive services from. (Community participation would be vital for re-integration purposes.) Of course, it shouldn't just be a case of special treatment. Mental health services, drug rehabilitation services, welfare reform, drug laws, housing policy, etc. in general -- for all sections of society -- need to be improved in the UK.
As for whether the police should arrest them, under current laws I'd be a bit iffy towards it because of our drug policies and whatnot. I'd openly be in favour of allowing the police to detain addicts for the purpose of rehabilitation in general though. Whether you think they're victims or not (I don't really care), the purpose of government policy should be to help them and in doing so protect wider society too.