Colourful character: Camila Batmanghelidjh on her unique approach to charity work

The inspirational world of Camila Batmanghelidjh. Each Christmas, she looks after hundreds of abused, neglected or abandoned children. But that's all in a day's work for Britain's most colourful charity leader.

On Christmas Day in 2007, 1,273 children turned up at Camila Batmanghelidjh's south-London drop-in centre, The Arches, for lunch. The place was so ludicrously crowded that this year, Kids Company, the charity that runs The Arches, had to commandeer a nearby school, to accommodate the ever-growing demand. It's great, of course, that there is somewhere for these children to go. But it's utterly heart-breaking that their families cannot put them first, even for one day.

That's what Batmanghelidjh's Kids Company is all about, week after week, year after year. It provides, alongside therapy, a day-time surrogate home, where children are the unquestioned priority that they ought to be, but aren't. Kids Company may be fêted as a unique social experiment, and its colourful founder may be celebrated as an outstanding charitable entrepreneur. But actually, what Kids Company does is simple, so simple that its very existence is a reproach to the manner in which statutory social care is generally organised in this country.

Batmanghelidjh is herself in no doubt about what she would do had she the power to transform children's services in Britain. Sitting calmly at the centre of the hive of activity she has created in this formerly derelict Peckham oasis, Batmanghelidjh displays utter confidence in the efficacy of her own approach. "I'd attach a centre like this to every social-work department, and I'd put all the children in need, all the nebulous characters, into the centre as members," she says. "I'd get the health department to deal with those with social dysfunctions, and the social-work department would deal only with the life and death cases.

"I would have teams with roving vans and if you are on the child-protection register, then you would be obliged to hand over a house key. You would understand that the roving team could turn up at any time, night or day, to check that child and check that household. None of this telephone-call-I'm-coming so that chocolate can be spread over the wounds. You just turn up."

Batmanghelidjh does not get things done by being confrontational. But her contemptuous reference to the notorious Baby P case in Haringey is a measure of her angry despair at the conventions attached to mainstream social services. One of the most telling aspects of the Baby P case was that the child's mother was wrongly considered to be merely neglectful, not actually abusive.

Batmanghelidjh, who trained as a psychotherapist, strongly believes that even if this assessment had been correct, it would still have been profoundly misguided. Even though I think myself that social services are far too tolerant of neglect, I'm still shocked when Batmanghelidjh asserts that neglect is actually worse than abuse.

Yet I quickly understand that she is absolutely correct. Batmanghelidjh shows me a couple of photographs of brain scans, one of a cared-for child and one of a neglected child. She traces her finger round the periphery of the brain of the neglected child, where a white line representing absent neural development can clearly be seen. "Neglect – continuous lack of love," she says, "deprives the child of a personal soothing repertoire."

Suddenly, it's obvious. A cared-for child has the resilience to recover from abuse, and the hope – the ability to trust – that allows him to turn to another adult for help in escaping it. A neglected child, even if he is never exposed to active and deliberate assaults, physical or mental, is more entirely alone, marooned by his inability to express his own hurt, or understand the hurt of others.

Mostly, however, Kids Company children have been both neglected and abused. The exposure of underdeveloped brains to the chemicals released by active fear, quite naturally produces what society understands to be the anti-social, feral child. There is only one way for this complex emotional deficiency to be addressed – and neurological research suggests that the human brain can develop a "soothing repertoire" until it is about 27 years old. That one way is, quite obviously, to apply the care and warmth that has so far been absent, or insufficient, in a life, and to undo the damage caused by trauma using therapy. That's precisely what Kids Company sets out to do.

The 15 independent evaluations Kids Company has been subjected to since 2000 – featuring such astounding statistics as "96 per cent return rate to education and employment for children who were otherwise disengaged" or "impact on crime reduction 88 per cent" – suggest that the charity does its work with wonderful efficiency.

The achievement is all the more brilliant when the myriad problems faced by the children are taken into consideration. Of young people referring themselves (by word-of-mouth) to Kids Company street-level centres, 82 per cent arrive with substance-misuse problems, 84 per cent arrive homeless, 81 per cent have some criminal involvement, 83 per cent have sustained trauma, 87 per cent have emotional difficulties (with a good proportion of these displaying psychiatric conditions), and 39 per cent are teenage carers, struggling to cope. Many of them have not been in formal education since the age of 10.

uite why Batmanghelidjh is so well-placed to deliver a service to people considered by the government to be "hard to reach" is not very much of a mystery, to her anyway. She says it's what she's wanted to do since she was nine years old. Alison Williams, who was at Sherbourne School with the Iranian exile as a teenager in the 1970s, confirms that Batmanghelidjh "hasn't changed since then at all".

When Williams says that Batmanghelidjh hasn't changed, she doesn't merely mean that she was always a big girl who wore the bright ethnic clothes and elaborate turbans that make her instantly recognisable – although, as it happens, she was. Williams also confirms that Batmanghelidjh was already certain of her vocation, and already adept at establishing a practical arena in which she could enact her ideas. Williams says that Batmanghelidjh "saved my life, and the lives of a lot of my classmates", because she organised a self-help group for the girls at the boarding school who were desperately homesick.

Yet the others could not have been quite so desperately homesick as Batmanghelidjh was herself. She and her siblings had been sent by her father, a wealthy Iranian entrepreneur, to England to be educated. While the children were in England, the Shah had been overthrown, their father had been imprisoned – they were told he had been executed, though this turned out to be untrue – and their Belgian mother had gone missing. The children were stranded without any money, and the stress was so great that Batmanghelidjh's sister committed suicide.

Batmanghelidjh herself got on with things though – arranging access to her father's bank account in England via a sympathetic bank manager, getting political asylum with the help of her school, and working at children's nurseries in order to fund her studies at Warwick University. Despite her severe dyslexia, she got a first in theatre and dramatic arts. Over the years she has piled up further qualifications, mainly psychotherapeutic.

The odd thing about Batmanghelidjh's early conviction that she wanted to work with needy kids was that during her own childhood she never, ever met any – because she, her brothers and lost sister led an exceptionally cloistered life. "I thought mine was a normal childhood – that you were supposed to get kidnapped if you were a child. I didn't understand it had to do with my father's wealth. We were friends with the children of the Chief of Police, and we swapped police drivers, and that was normal.

"My father owned this massive sports centre – skating rink, swimming pool – and we were driven to the sports centre. We used to skate, shoot, dry-ski, and then we were driven back home. We didn't set foot on the street. But through the windows of the car I could see people on the streets, you know, other children with different lives. And I just thought: 'That's what I want to do.'

"My grandfather was a multi-millionaire by the time he was 21. My father and grandfather were entrepreneurs. They would sit at lunch and say: 'Let's build a big ski resort, let's build the biggest ski resort in the world.' Within a month they'd have started work. So I had this sense of incredible possibility – there wasn't going to be a barrier.

"So, that was one side of the family. The other side, my mother's side ... my grandfather was an amazing paediatrician and he fascinated me even more because he was so understated and graceful, a kind of spiritual character. He treated ill children, and people used to queue up in the streets to see him. I think I tuned into that spiritual thing via him. Not religious, or staring at crystals, or anything like that. I'm very pragmatic. But I am very vocationally driven and I'm entrepreneurial. It's served me well. I'm not fazed by powerful people at all."

Initially, however, Batmanghelidjh found that there was a demand for children's psychotherapy only in the private sector, and she worked in Hampstead with patients she refers to as "the children of the wealthy". When she was 25, she saw an advert placed by the BBC Children in Need charity, looking for a part-time therapist. "I applied, got the job, and it was under the auspices of the Family Service Unit, funded by Children in Need. I ended up at a family-service unit in Camberwell, south London.

"During that time, I came across a seven-year-old who was trying to kill herself by putting a plastic reading folder over her head and wrapping a towel round it. I did a home visit and realised that the mother wouldn't even be able to bring her to one-to-one therapy sessions.

"So I started seeing her in her school library, with the same suitcase of toys and art materials I was using for the families of the rich. She disclosed that she'd been sexually abused by three men who lived in a tower block near her home, and that's when I realised the whole structure was flawed. From the age of five till the age of seven the girl had had no one she could speak to about what had happened.

"That was when I became determined to take the service to where the children are, and to structure the service from the child's perspective only. That's what we see here, at The Arches. Here, the child is our primary client, to whom we're accountable, and everybody else is a secondary client whose needs we will meet, provided they meet the needs of the child. So we'll give counselling to a mother, we'll pay for her rehab, if she's going to take care of her child. If she's not – if she's already detached and disengaged – we won't. Our goal is to reach the child."

ne of the touching things about Kids Company – and it is a very affecting place – is the quotidian nature of many of the services its large staff provides. They cook the children hot, nutritious meals. They help them with their homework. They get a doctor for the 60 per cent of children who turn up without a GP. They organise trips to the dentist for them. They do art with them, or play sports. They get them new clothes when they need them. They help them to sort out college places, or to look for jobs. They take photographs of them, and put them in frames on the wall. They home-school them, if necessary, even though Kids Company is not strictly speaking, their home. They do so many of the things that, normally, a parent would do for their child. One young man, while we are talking, tells Camila that the centre's sports instructor thinks he can take him to Spain, to enter a marathon. But he'd need some proper running shoes. "We'll get you some, don't worry," says Batmanghelidjh, just like a mum would.

Significantly, however, the centre spends a lot of its time providing advocacy for the children, fighting hard to get them access to statutory services. One reason why Kids Company gets no funding from the local authority is because the organisation is so often in conflict with it. Kids Company has taken local authorities to court scores of times, in search of a care order or an admission to the child-protection register. They always win. Yet Batmanghelidjh only ever does this as a last resort. "The problem with the voluntary sector is this," she says. "You're only as good as the statutory agents who are taking your cases. So you have a tough choice. Either you will be as mediocre as they are, or you will rise above it and create a parallel route."

That's why Kids Company itself so often undertakes things that local authorities ought to be doing – like finding places for homeless young people to live. "We employ housing people who build relationships with private landlords, pay deposits and put children together in houses. We help them to set up home, teach them to look after themselves." Kids Company does not place an age limit on the children they help. They have children who are at university, and still calling their key worker at the charity, in lieu of a mum or a dad, when things go wrong.

Yet the practical help is a means, really, and not an end. Batmanghelidjh's main aim is to supply every child who comes into her ambit with that "soothing repertoire". Most of all, the Kids Company staff simply talk to the children in their care, and listen to them.

Each of the 70 or so key workers has three or four children assigned to them, and it is they who take the front- line decisions about how each child should be helped. They are expected to engage intensely with the children in their care, and have weekly therapy themselves in order that they can cope with the demands of building strong relationships with fragile and emotionally backward young people. The children are given mobile phones, so they can contact their key worker at any time. They are also given Batmanghelidjh's number, and told they can call her if they feel let down by a worker at the centre. Amazingly, this actually happens only about three times a year.

It is the key workers who organise further support for the children, in conjunction with the therapist they are assigned themselves. They work with the specialist staff within the organisation itself, and outside it, in the statutory services, if that proves necessary.

In the 13 years that Kids Company has been open for business, the organisation, through its street-level centres and the centres that it runs in schools, has helped 11,000 children. Many of these children just turn up, on their own initiative, drawn by the promise of emotional and physical support, and, perhaps crucially, still hopeful enough to believe that if they look hard enough, they'll find comfort.

Kids Company is not only a success in terms of the number of clients it attracts, and the efficiency with which it turns round their lives. Despite the high level of commitment it asks of its staff, and the modest (or non-existent) remuneration they receive, people are desperate to work here, and staff retention is very high indeed (about 90 per cent). Batmanghelidjh says that this is because people understand that they can really help children within the organisation's structure. Kids Company may always be struggling to find money, and it may not have a huge amount in the way of material resources to draw on. But staff are encouraged to engage with the children emotionally, and "carry them in their minds", when so often in the statutory sector staff can only survive by doing the opposite, and closing their eyes to neglect they would never dream of subjecting their own children to.

Batmanghelidjh reckons that Kids Company spends between £8,000 and £15,000 per annum on each child receiving support at a street-level centre. She is utterly withering when I ask her how this compares with the sort of sums spent by the statutory sector. "You know, they don't even cost a child. This is how dysfunctional they are. So, if you're Adam, and you go to social services, you're counted as one child. If you're the same Adam and you go to mental health, youth offending or leisure, you're counted as completely different children. So nowhere do they actually capture the cost of the child in their system.

"When we went to do economic cost comparisons with our model, we could not find a local authority that was costing their children. In fact one local authority, realising this, did it for us on seven of their children and they found that they'd spent nearly £2 million on the group. So economically, it's profoundly dysfunctional.

"The consequence of that is that they take the kids off the register for completely the wrong reasons. You have to be suspicious. Why is it every year that about 500,000 are referred and about 30,000 end up on the child-protection register? Someone is controlling these figures. It's all being done with the wrong mindset. And yet it could be so easy. Honestly. Give me the money and I'll do it."