Is the Big Society destroying the very things it's meant to stand for?

My 84-year-old grandmother was rescued by the Big Society. Or was it the big state? Or was it the doctrine of state multiculturalism? Listen to her story and you tell me. Chau Yuk Sim arrived in Britain from Hong Kong in 1960 with two young boys (one of them my father). Along with my grandfather, who had arrived in the UK a few years before, they set up a laundry in Sheffield and worked long hours doing tedious manual work. When the Chinese laundry industry collapsed, thanks to the arrival of domestic washing machines, the family moved into the restaurant trade. But in the mid-1990s, after a life of hard work, things went wrong for Chau Yuk Sim. She separated from my grandfather and found herself living in a grim Sheffield council estate. Speaking only limited English, she felt unsafe, isolated and unhappy.

Salvation came in the form of an organisation called Tung Sing in Manchester that houses elderly members of the Chinese community. With some help from my father, my grandmother made the trip across the Pennines in 1996 and now lives in a converted warehouse that looks out over Manchester's Canal Street, the centre of the city's throbbing gay scene. It's an unusual location for a community of old folks. Outside the door to her block are signs advertising nights with names such as "One for the Boyz" and invitations to see an act called "Fanny and the Flaps". None of that bothers my grandmother, though. She feels safer among the partying throngs of Canal Street than she ever did on the Crystal Peaks council estate in Sheffield. She enjoys being surrounded by other elderly Chinese people whom she can chat to every day. She relishes the day trips to nearby locations such as Blackpool, Morecambe and Liverpool that Tung Sing organises for the residents. She values the weekly contact with her Cantonese-speaking support worker, Christine Sin. My grandmother also benefits from the services of a Manchester charity called Wai Yin that works closely with Tung Sing in providing help for the elderly Chinese. When my grandmother needed a walking stick last year, the two organisations combined to sort one out for her. "Of course life is better than it was in Sheffield," she told me when I visited her recently. "It's so nice to have people to talk to and to have people to visit me."

So what are these two organisations that have delivered such a wonderful transformation in my grandmother's life? Tung Sing is a housing association: a not-for-profit organisation that buys homes and lets them out to tenants at affordable rates. The provision of housing for the less well-off was done mostly by local councils. But the housing association sector expanded significantly as a result of Margaret Thatcher's war on local authorities in the 1980s. Mrs Thatcher gave residents the right to buy their own council homes at a large discount, which depleted the authorities' stocks of affordable housing. And instead of paying Whitehall grants to build new affordable homes to local authorities, as had been the practice in the past, she ensured that cash from the centre flowed to housing associations. Thatcher believed housing associations would be more responsive to the needs of communities than sclerotic left-leaning councils. It was, if you like, an early form of Big Society privatisation. As the housing association sector boomed, a number were established to serve the needs of specific ethnic minorities. Tung Sing was one of them. It was formed in 1984 when a group of Chinese professionals working and living in Manchester got together to provide housing for their ageing parents.

Wai Yin was also born out of the community, set up in 1988 by a group of Chinese women to help vulnerable Chinese in the North-west. It performs an impressive range of services, from helping the elderly to do their shopping, to providing support for those in the community with mental health problems, to assisting the children of recently arrived Chinese immigrants enrol in schools. It administers a team of volunteers, of all ages, from across the Chinese community. What, you might wonder, could be more in keeping with the Big Society ethos that David Cameron says he wants to encourage?

Yet both organisations are under serious financial pressure because of the Government's spending cuts. Tung Sing is grappling with the consequences of reductions to something called the "Supporting People" budget. This is a central government grant to local authorities designed to help vulnerable people, such as the infirm elderly, the disabled and people with learning difficulties, to live independent lives. It funds people to help these groups to perform basic tasks such as paying their utility bills, installing alarms, claiming benefits and dealing with debt. Last year's spending review revealed that the grant will fall from £1.64bn this year to £1.59bn in 2014/15, a 12 per cent real-terms cut. But some authorities are facing much bigger reductions than that. Manchester City Council will see its Supporting People grant fall this year by 35 per cent, from £35m to £25m. Tung Sing gets £250,000 a year from Supporting People, which it uses to run a team of five staff. Manchester City Council has told the organisation to be prepared to deal with cuts in this grant of up to 30 per cent.

So what will the effects be? Last week, I spoke to Grace Ng, a Tung Sing support officer whose job is funded by Supporting People, who told me: "We could have to reduce our hours from 35 to 32 a week. Each of us looks after 55 people. 35 hours a week is sometimes not enough. Our residents are getting older and older. Their needs are getting more and more. The worst case is that in a few years, they will need more help and we won't be able to provide it."

Wai Yin is even more vulnerable. Some 90 per cent of the charity's £1.2m annual income comes from Manchester City Council and its director, Sylvia Sham, is expecting to be informed soon of cuts of up to 50 per cent of her budget by Manchester City Council. Sham predicts serious consequences: "In the Chinese community there will be more people isolated, more mental health problems, more people who just won't be able to access state services." And what makes these cuts especially foolish in the eyes of workers at Tung Sing and Wai Yin is that what they do saves public money over the medium term. By keeping people such as my grandmother able to live independent lives, they make it less likely that they will need state money to receive full-time social care. And Wai Yin prevents Chinese people with mental health problems from adding to the costs of the NHS. This isn't wasteful spending; it's a social investment.

The Government has sought to blame Manchester City Council for the fact that these important services are going to be eroded, accusing the Labour-controlled authority of playing politics to embarrass the Coalition. The Department for Communities and Local Government argues that councils could protect front-line services for the vulnerable if they found savings elsewhere, pointing out that many of their grants were "un-ring-fenced" by the Government last year, giving them more flexibility over what they spend their income on. But while councils were given more discretion on spending, the aggregate value of their funding was also slashed drastically.

Moreover, some Tories, such as the influential editor of the ConservativeHome website, Tim Montgomerie, refuse to play this game of devolving blame for cuts on to councils. They argue that because organisations such as Tung Sing and Wai Yin rely on state funding, they are a manifestation of the Big State, and thus part of "the problem". Montgomerie has argued on his website that direct funding of voluntary organisations tends to corrupt charities, "pulling them away from accountability to individuals and communities". This is not my grandmother's experience. Nor is it mine. On a recent visit to my grandmother's block on Canal Street, I saw a thick-set 80-year-old lady, Shum Fung Kiu, rush up to Grace and Christine, the two support workers, to ask, in Cantonese, why her pharmacist had given her two packets of pills rather than her usual one. Grace and Christine patiently helped Ms Shum to solve the mystery while, at the same time, assisting 78-year-old Chan Lin Chau, a retired chef who leaves his flat only once a week, to fill in his census form. I have to tell Montgomerie that, to me, Grace and Christine looked pretty accountable to their residents.

Also, the argument that charities must not be reliant on the state for funding ignores the fact that many organisations such as Wai Yin were encouraged by local councils to apply for public contracts. And Cameron seems to endorse this very approach. In a speech last month, the Prime Minister said that he wants charities and voluntary groups to be able to bid for contracts to provide local services. Cameron ought to take a look around him: in Manchester, that is already happening. Charities around the country are providing important services on behalf of the state. But thanks to his administration's cuts, their ability to do so is under serious threat.

Some have a different objection to organisations such as Tung Sing and Wai Yin. By providing translators for people whose grasp of English is shaky, the argument goes, these bodies promote cultural segregation. This, critics say, discourages beneficiaries from ever learning English and fosters ghettoisation. Mark Wallace, of the right-wing pressure group the TaxPayers' Alliance, wrote on the ConservativeHome website last year: "It's time we stopped spending taxpayers' money on a policy which keeps the different elements of our society separate rather than bringing us together." Proponents of this "translation-bad" view have had the wind in their sails since Cameron proclaimed an end to "the doctrine of state multiculturalism" in Munich last month.

But translation is not a straightforward business. My grandmother has been in Britain for six decades. Many other elderly Chinese Tung Sing residents have been here just as long. I agree that she, and they, ought to have developed a surer grasp of English when younger. But we are where we are. You could cut funding for organisations that provide translation services, but then you would merely have confused old people unable to communicate properly with doctors, council workers and utility companies. That would not encourage integration, only misery. I entirely agree with Cameron and others when they argue that English lessons for new migrants, rather than translation, should be a priority. But many housing associations that serve ethnic-minority communities, such as the Bangla Housing Association and the Tamil Community Housing Association, both in London, do help their residents to learn English by organising state-subsidised English for Speakers of Other Languages (Esol) courses. Wai Yin also runs English lessons for Chinese immigrants in Manchester. If my grandmother had had access to such an organisation 50 years ago, her English would most likely be far better than it is today. And it is these very bodies that are under pressure because of spending cuts. If the Government is serious about aiding integration, it should be boosting the income of these third-sector bodies that serve ethnic minorities and investing more in Esol.

The problem appears to flow from the top. David Cameron seems to me to have a tenuous grasp on the social conditions of vulnerable groups in this country, particularly those in ethnic-minority communities. He doubtless has good intentions, but his rhetoric betrays a worrying naïvety. The Prime Minister's prescriptions – "the state must withdraw and society must expand", "multiculturalism must be replaced by muscular liberalism" – are so simplistic as to be dangerous. Tung Sing and Wai Yin show that the state and society are often entwined. It is impossible to say where one ends and the other begins. And multiculturalism, in the sense of reaching out to groups on the basis of their ethnic background, can be a powerful way of drawing isolated people into broader society. While researching this subject, I spoke to Lara Oyedele, head of the Odu-Dua Housing Association, which helps Afro-Caribbean people in north London. She told me: "It's never, ever, ever been about segregation. It's about providing people with an opportunity to have a comfortable home to live in. And then they can get on with the rest of their lives." So back to the original question. What was it that rescued my grandmother? The Big Society, the big state, or multiculturalism? My answer would be: all three. And if we want to rescue others like her, we need to understand and support all three.

When our family visits to my grandmother are over, she always comes to her third-floor balcony to wave us off. As we disappear down Canal Street, we can still see her silhouette, high above the nocturnal revellers. It's a tremendous comfort to know that, when we cannot be there, my grandmother has organisations such as Tung Sing and Wai Yin looking out for her. And I know that she values immensely the support they provide. It would be nice to think that other vulnerable and isolated people across Britain will be able to rely on that kind of support in future. Sadly, thanks to the yawning gap between the rhetoric of this Government and the reality of those in need, it's difficult to be confident that they will.