Mandarins explain decision-making over Kids Company payments
Whitehall mandarins have denied being put under pressure by Government ministers to continue funding controversial charity Kids Company in the period before its collapse earlier this year.
But they confirmed that ministers in successive governments took a special interest in the charity, which provided support to disadvantaged children in south London, Bristol and Liverpool under the leadership of charismatic founder Camila Batmanghelidjh.
Appearing before the House of Commons Public Accounts Committee, former Cabinet Office permanent secretary Richard Heaton and Department for Education permanent secretary Chris Wormald insisted that Kids Co was not given "special treatment" in the provision of public money believed to have totalled £46 million over 15 years.
But they accepted there were lessons to be learned from the way the situation was handled.
Kids Co was awarded a £3 million government grant in June this year, despite Mr Heaton having taken the unusual step of requesting a ministerial "direction" on the decision, as he did not feel able to advise that it would represent value for money.
The decision to overrule Mr Heaton's warning came just weeks after an earlier grant worth £4.3 million was provided on condition that the charity undertake significant reforms to put it on a sustainable footing.
The former civil servant said he considered seeking a ministerial direction on the earlier grant, as he was "apprehensive" about the prospects of success, but took a "judgment call" to go ahead after Kids Co indicated it was willing to draw up a plan for change.
"I wasn't totally comfortable with it," said Mr Heaton. "It was a decision I found to be a close call and quite a difficult one... I decided I didn't require a direction, but I did consider it."
He said the Cabinet Office was "startled, shocked, surprised" when the charity came back to the Government just six weeks later requesting emergency funding to save it from closure.
His immediate response to the "astonishing" request was to say "No, out of the question", but Kids Co then came back with a radical restructuring proposal involving Ms Batmanghelidjh stepping down as chief executive.
"Ministers, quite reasonably, took the view that it was a punt that was worth funding," Mr Heaton told the committee. It was a prospect, even if it was quite a narrow prospect, that was worth giving one last chance to the charity.
"It was a specific proposal for radical restructuring that I couldn't sign up to or advise ministers to sign up to."
Mr Heaton said Kids Co was "an unusual charity in that it was well-networked to all sorts of people and well-liked politically".
But he insisted that at the time of the £4.3 million grant he "certainly came under no political pressure either to give or not to give a direction".
"I wasn't, I think, unduly influenced by the politics," he said. "I was aware that it was a prime minister-favoured charity and plenty of ministers across Government favoured it, so I would have had to have had robust grounds on which to seek a direction, but I think I am fairly robust and if a direction was the right thing to do I would have done it. I was aware it was an election period and everything was of heightened interest, but no-one put pressure on me to do or not do anything."
He told the committee: "My ministers at the time, none of them put personal pressure on me." And Mr Wormald said : "No, I was not put under any pressure."
Mr Heaton said ministers were "entitled under their powers in the Charities Act to back whichever charities they believe will make an impact".
The job of officials was to ensure that financial support authorised by ministers was "properly implemented in a way that delivered value for the taxpayer", and in that respect Kids Company had received "no special treatment at all".
Mr Wormald insisted that the charity was given no special treatment in terms of the way officials took decisions on its funding.
But he told the committee: "Ministers of successive governments have made clear that they thought that Kids Company was doing very important work and deserved support. If you want to call that 'special treatment', then do... If you want to define 'special treatment' as people taking a special interest, then clearly they were."
Committee member Anne-Marie Trevelyan said ministers appeared to be "determined to support this particular charity", and asked why Kids Co had never previously been asked to get its financial management in order before seeking further grants.
"If it was always because ministers were keen, why on Earth hasn't there been a ministerial direction all the way through?" she asked the mandarins. "You and your predecessors' judgment has been flawed and flawed and flawed and flawed."
And Houghton & Sunderland South MP Bridget Phillipson questioned whether it had been "fair" to continue funding a largely London-based charity for so long with levels of support which she said "wouldn't be offered to charities operating elsewhere in the country."