£3m government lifeline fails to save troubled kids charity

The organisation claims to work with 36,000 vulnerable children and young people, and officials, charities and councils have been in discussions preparing for the impact the closure could have.

The youth organisation has been hit by allegations of bad financial management, prompting its high profile founder Camila Batmanghelidjh to quit as chief executive.

Ministers agreed to give the extra cash to help restructure the charity despite objections from a senior civil servant who warned they did not think it would be “value for money”.

Southwark Council, in south London, where many young people work with the charity, said: “We have been in discussions with the Department for Education and other local authorities, preparing for the closure of Kids Company.

“Although Southwark doesn’t refer any children to the charity, some will have sought out their services. We are ready to support any vulnerable children and young people in the borough who are affected by the closure of Kids Company.”

Mayor of London Boris Johnson said the priority must be to draw up a plan to ensure the vulnerable young people the charity works with do not slip through the net if it closes.

He told BBC Radio 4’s Today programme: “It’s a great shame that it doesn’t seem to be working in the way that I think everybody who supports the idea would like.

“What I want to happen is to ensure that all the kids who’ve been receiving care and attention from Camila and her team will have some kind of safety net.”

The high-profile charity has been shaken by claims it has not properly managed its finances.

It received the £3 million grant from the Cabinet Office last week after agreeing, on the orders of the Government, to make changes in its leadership, management and governance.

But Ms Batmanghelidjh emailed staff within the charity last week to say they would be paid using some of the grant money, according to the BBC.

The BBC reported that the Cabinet Office is making plans to claw back the grant because it believes conditions attached to the use of the money were not met.

BBC Creative Director and arts presenter Alan Yentob is a trustee of Kids Company.

It emerged today that senior Whitehall civil servants took the rare step of requiring a written, direct order from ministers before agreeing to the £3 million funding lifeline.

Cabinet Office Permanent Secretary Richard Heaton requested the order - formally known as a ministerial direction - because he had concerns the extra funding would not represent value for money for the taxpayer.

Ministerial directions are rarely requested by mandarins and have been seen as a “nuclear option” - a way of publicly registering discomfort at the decisions being taken by their political masters.

Since May 2010, at least six ministerial directions have been sought by officials - all in 2015 - with concerns about value for money raised in each case.

Whitehall chiefs requested a written instruction on continued government support for Hatfield Colliery in January, which was issued by then business secretary Vince Cable.

In February, Transport Secretary Patrick McLoughlin issued a ministerial direction overruling concerns about his intention to replace the Pacer trains on railways in northern England.

In March, Mr McLoughlin issued another ministerial direction giving the green light to the hiring of consultants to review the process on decisions about the future of Manston Airport.

Business Secretary Sajid Javid gave a written direction in June to overrule concerns from mandarin Martin Donnelly about his plan to give away an extra 1% of Royal Mail shares to employees as part of the privatisation process.

Also in June, Environment Secretary Liz Truss gave a written ministerial direction to proceed with the flood reinsurance scheme despite official concerns the “quantifiable economic costs” were greater than the benefits.

In his request for a ministerial direction on Kids Company, made on June 26, Mr Heaton said he had “limited confidence” that the charity would implement the changes set out in its restructuring plan while meeting the stringent conditions in the £3 million bailout.

In their reply, Cabinet Office Ministers Oliver Letwin, the Chancellor of the Duchy of Lancaster, and Matthew Hancock noted Mr Heaton’s concerns but added they were confident that the managerial changes at the charity “give it a realistic prospect of long-term viability so it can continue to deliver for vulnerable young people”.

In 2012, then Cabinet Office minister Lord Maude told Civil Service World he encouraged the use of ministerial directions: “This is seen as a massively nuclear option, and I don’t think it should be seen as that.”