Poverty by a thousand cuts

Slashing welfare schemes that are designed to save public money in the future will ensure that nobody feels very good

Feeling good? We are ready for a feel-good Budget tomorrow for a nation at ease with its wallets and handbags. We shall have tax cuts - only prudent ones of course, but prudent for whom?

Down on the ground, this is what failure to raise sufficient taxes means right now: a third of all health authorities are in deep trouble, slashing and burning to keep within the law and end the year without debts. Most non-emergency cases will have to wait until April. Local authorities, too, are scything their budgets.

What is being cut first? The very projects designed to catch problems at an early stage, cheap social programmes where a little spending now will save exorbitant spending later: projects that shore up families to stop children being taken into care (costing pounds 40,000 a year per child) - and projects to keep young people off drugs and out of prison (which costs pounds 100,000 per prisoner).

The Independent is based in Tower Hamlets, the poorest borough in Britain. This is what is happening right here, on our own doorstep - and it is a pattern mirrored in many inner cities, according to Cipfa (the Chartered Institute of Public Finance and Accountancy).

Today the East London and the City Health Authority will announce savage cuts to most of its social programmes because it is pounds 20m in the red. Reluctantly, it has just told 140 successful projects that their grants are to be slashed. These are 140 assorted voluntary organisations struggling to hold back a tide of deprivation and human calamity:

It will mean the closure of three Newpin centres, that help struggling new young mothers cope with serious mental problems by exploring their behaviour and their usually disastrous backgrounds. They learn to break the cycle of bad mothering and to build a relationship with their child. The programme is mainly run by mothers who have themselves been helped by Newpin, at a modest cost of just pounds 3,000 per family.

Then there is the Tower Hamlets Youth Counselling Service where 12- to 25-year-olds in trouble are referred by schools and GPs with problems that endanger their social survival: depression, drug dependency, eating disorders, sexual abuse, school problems, crime. There is already a two-month waiting list, which makes little sense in dealing with such emergencies. Now the health authority has withdrawn all its funding.

Or what of the Nacro programmes, trying to keep offenders out of further trouble? Or the drugs programmes, such as the Maze in Brick Lane, run by the YWCA, counselling 2,000 young people a year in schools or in a drop-in cafe, helping them and their families? It will now have to close.

The other schemes, all 140 of them, were originally taken up by the health authority because they are designed to catch problems early, in order to avoid far more expensive treatments later. One offers care for Altzheimer's sufferers, to give their carers a respite to stop them breaking down under the strain and having to put their relatives into a home.

Are these cuts prudent? Is this what the Chancellor means by prudence? No, they are wildly profligate short-term cuts that will quickly lead to far greater expense. Of course, we cannot prove that to the Treasury, the arch-short-termists. These schemes are run on a shoe-string and no one has the money for proper social monitoring to prove how well they work, or exactly how much money they save. But if they keep only a small proportion of people out of institutions, they must save their costs a hundredfold.

The health authority is well aware of that, but what can it do? Part of its debt arises out of having to cope with greatly increased numbers of mental patients, diverted from prisons, who need expensive, secure accommodation. (Unfairly, money does not follow them out of the prison system.)

So what of the local authority? Shouldn't it be paying for some of this? No. Dirt-poor Tower Hamlets, with 20 per cent unemployment, has to claw back pounds 9m this year and a further pounds 8m next. "What are we to cut?" asks the chief executive, Sylvie Pierce. "Our youth service? Our drug service? It's heart-breaking." She talks of the downward spiral in drugs, crime and unemployment, and yet she, too, will have to cut prevention projects.

She gives another example of the finances of madness: Tower Hamlets council will have to cut care packages for frail old people waiting to leave hospital. So the health authority will find even more of its beds blocked with people who do not need to be there, costing pounds 2,100 a week each, when a fraction of that money would keep them comfortably elsewhere. But the local authority also protests that economies in the NHS, pushing people out of beds early, has put huge financial pressure on their community care budget. And so, with the greatest sympathy for one another, the two authorities dump people from one budget to the other. This economic insanity happens all around the country.

Although this is mainly a tale of acute shortage of funds, it is made worse by a lacuna in public policy that successive governments have failed to fix. Four budgets - health, local authority, social security and criminal justice - all stand to gain from projects that keep people out of dependency on the state. Yet naturally all are eager to push the costs of such projects on to one another. There are some joint funding schemes, but they are usually the first to go in hard times. What is needed is an over-arching organisation to provide these social programmes with ring-fenced money and the power to take slices of funds out of the relevant departmental budgets. That is the only way we can ever shift money out of expensive acute services - the here and now - into cheaper prevention, with savings for the future.

The nation is in the grip of panic about imminent social collapse - tearaway children, abominable parents, neighbours from hell and drug-driven crime. Yet something has gone wrong with the body politic. The wires have short- circuited, so the link from all that social anxiety has become disconnected from the part of the brain that knows perfectly well what would put things right: money, money and money.

So what would a prudent Budget be? Would it be these reckless cuts in the few threadbare projects that try to hold the social fabric together? Well, if taxes are cut tomorrow, save your money to spend on a better burglar alarm, car security system, bars, railings and insurance policies. Is that what feel-good really feels like?