Tim Loughton
Tim Loughton

Tim Loughton, the ex-children's minister, would not have been able to serve in his former role without funding Kids Company because of the negative consequences had he turned the charity down, MPs heard today.

Loughton, who is still the Conservative MP for East Worthing and Shoreham, told MPs on the Public Administration and Constitutional Affairs Committee, which is holding an inquiry into the relationship between the collapsed charity and successive governments, that civil servants had made it clear to him that there would be "uncomfortable ramifications" if he did not approve funding applications from the charity.

He might even have had to resign, he said.

Loughton said the applications he reviewed from the charity – after they were first approved by civil servants – all noted the senior contacts Camila Batmanghelidjh, the charity's founder, had at newspapers such as Metro and the London Evening Standard.

He said it was made clear that Batmanghelidjh could create "uncomfortable press coverage" for the government.

The Conservative MP David Jones noted how, on the one hand, civil servants were telling ministers not to fund Kids Company and, on the other, they were highlighting the potential ramifications of not doing so.

Correspondence published by the Cabinet Office this summer showed that ministers overruled concerns raised by civil servants in the awarding of a £3m grant that was paid out just days before the charity collapsed.

Ronnie Cowan, the SNP MP, said the government should have looked into the claims the charity made regarding its need and either backed them up or debunked them rather than "just handing over money because of bad publicity".

Loughton said the charity made "veiled threats" and took a "bullying attitude".

Several MPs on the committee remarked that the threats did not seem to have been very veiled.

Loughton said he had made it clear to colleagues that the charity shouldn't expect to continue being a "public funding junkie" and that the two-year grant given by the Department for Education in March 2011 should be the charity's last.

But the charity received another grant from the DfE in 2012 after Loughton was overruled by Downing Street.

Asked whom he believed held the responsibility for the government's dysfunctional relationship with the charity, he said it should be "shared throughout government".

Loughton said it was too easy for the government to commit grants and then not monitor them properly and that ministers had to take ultimate responsibility for signing off public money.

Referring to Batmanghelidjh's approach, Loughton said that she never appeared to take heed of any of the advice she was given by government about the charity's financial governance. "She always seemed to muddle through, but never took the opportunity to get the finances on an even keel," he said.

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