Big society in action is how civil society minister Nick Hurd described the award-winning Paddington Development Trust (PDT) which he chose for his first ministerial visit in May 2010. "Residents have real sense of ownership and power," he enthused on Twitter about the west London regeneration organisation that supports residents to volunteer a total of 5,000 hours through 350 different volunteering opportunities.

But shortly after Hurd's praise, the organisation was among the first victims of public spending cuts when £350,000 was axed as the government scrapped its neighbourhood programmes. The trust's chief executive, Neil Johnston, has spent the last year figuring out how to continue its groundbreaking work.

Johnston says the organisation expected cuts, but the axe fell earlier than expected: "We had to move into a very unpleasant period, we had to let some people go," he says.

Although seven people have been made redundant, there is still a 45-strong team of full- and part-time workers. Johnston points out that the trust's business-minded emphasis on contractual income from statutory bodies – it runs resident engagement strategies for example – means it does not rely solely on government funding.

"We made a decision to run two broad strategies, one was an enterprising strategy, so we invested in capacity building in small groups, we built stuff, we set up and assisted business startups, youth enterprise."

Economic independence

The trust was formed by residents in 1997, with a mission to help the 60,000 population achieve "social, cultural and economic independence". By then Paddington, famed for its railway station and the Grand Union canal, had lost its transport hub role and was crying out for redevelopment. In addition, the 1980s "homes for votes" scandal at Tory-run Westminster council – whose boundaries extented west to Paddington – meant there was a need to rebuild relationships between the community and local authority. Many of the trust's founders were former Labour councillors or members of the local Labour party.

Johnston grew up in the area. "This is my patch – which is why I came into this job – I was astonished when I realised how little opportunity there was," he says. PDT focuses on four deprived wards. They are Queen's Park, Harrow Road, Westbourne and Church Street – all in the top 5%-15% of the Indices of Multiple Deprivation, despite being surrounded by areas of extreme wealth – and have high unemployment and benefit uptake and a 60% concentration of social housing.

PDT kickstarted improvements with £13.5m from the then government's single regeneration budget – among the first non-council groups in the country responsible for such a large amount of cash. Its strategy combines community empowerment with creative enterprise. In practice, this has meant creating four local area renewal partnerships – neighbourhood "hubs", each with its own resident-led forum – which encourage people to volunteer, run local events and have a bigger say in services.

Successes include leading a £6m plan for a landmark office and studio complex, Westbourne Studios, where the trust itself is based, and a neighbourhood enterprise centre delivering micro-finance to community enterprises. PDT has refurbished existing community facilities, created two new youth centres and secured grants and contracts worth more than £30m, for services such as neighbourhood engagement schemes and NHS health outreach initiatives. It has won numerous regeneration awards. Little wonder Hurd was impressed, which made it even more galling that its money was cut.

Now the dust has settled after the cuts were announced, Johnston is less angry and more pragmatic about PDT's future.

"We've got to break even, that's the bottom line. We operate very well as a business – you expand, you contract in any business – that is the reality," he says.

PDT's break-even budget is £3m for 2010/11, which it will mainly secure from delivering contracts and programmes for a variety of organisations including Westminster council, the primary care trust and the Greater London authority.

The cuts seem to have spurred further innovation. The survival plan for its neighbourhood work includes a pioneering plan to turn the Queen's Park forum into an urban parish council by May 2012. Residents needed 800 people to sign a petition to get the ball rolling and got double that, which, says Johnston, speaks volumes about community engagement. "The average parish council precept is about £45 a year, so if the residents charge that, they have a core infrastructure," he says. "The sustainable way to develop an area is to get the people who live there to pay for it."

Another project is PDT's new social enterprise, Pet Society, a volunteer-run shop selling pet food and accessories and offering pet health checks. It hopes to raise £10,000 – enough to fund the local Christmas lights and summer festival. While the trust's plans should help it weather the loss of its core funding, what of the impact of wider cuts? If housing benefit cuts force Paddington residents to move into cheaper boroughs, won't that undermine years of work?

Uprooting families

Johnston questions the coalition government's policies. "If families are uprooted, what are the costs involved? They have to resettle, it might not be easy to get a job, childcare, schools. If there's less stability in their new area, then what are the social costs further down the line?"

The only time his animation turns to weariness is when he discusses the label slapped on to the longstanding work done by organisations such as PDT: "If you don't have a political take on it [the big society], but see it really as an umbrella with a whole bunch of aspirations under it, the third sector is what the big society refers to," he says.

Johnston takes umbrage at what he sees as politicians' often patronising language: "The word 'communities' means poor people – big society means 'poor people'… this whole thing about broken Britain , but then people ask 'does that mean I'm broken?'".

On the recent riots, Johnston stresses he is not suggesting that Paddington's "relative calm" was down to the trust's community work, but explains it was "due in part to the continuity of regeneration and social and economic development". He adds that "a range of economic indicators often associated with social unrest have been on the rise for some time." Take the recent cuts to youth budgets: "Common sense dictates that they should in fact be increased … Lack of creative and constructive engagement within a community encourages destructive behaviours."

Johnston believes that the trust's community-based backbone is the reason it will survive the cuts: "People who are economically inactive, who don't get out the house much, don't mix, one of the injections is offering them the opportunity to fix up their area. The place is the passion here."