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Spending watchdog's abolition could be dangerous, say MPs Audit Commission's abolition could be dangerous, say MPs
(about 5 hours later)
By Ed Lowther Political reporter, BBC NewsBy Ed Lowther Political reporter, BBC News
The government's decision to abolish the Audit Commission could have "awkward" and "dangerous" consequences, a committee of MPs has said.The government's decision to abolish the Audit Commission could have "awkward" and "dangerous" consequences, a committee of MPs has said.
The body scrutinises whether local government in England spends its £200bn of public money each year properly.The body scrutinises whether local government in England spends its £200bn of public money each year properly.
It shed its in-house audit team in 2012, but the abolition of the residual commission has been delayed until 2015.It shed its in-house audit team in 2012, but the abolition of the residual commission has been delayed until 2015.
MPs worry that the successor regime will promote cosiness between councils and their private-sector auditors.MPs worry that the successor regime will promote cosiness between councils and their private-sector auditors.
Late last year, 700 auditors were despatched from their public-sector desks to undertake identical work for private-sector firms hoping to profit from the commission's demise.Late last year, 700 auditors were despatched from their public-sector desks to undertake identical work for private-sector firms hoping to profit from the commission's demise.
There was little resistance from MPs to this part of the plan. Before the reforms, the commission was already out-sourcing 30% of its auditing work to private firms.There was little resistance from MPs to this part of the plan. Before the reforms, the commission was already out-sourcing 30% of its auditing work to private firms.
The commission's inspection regime too was abandoned. The Local Government Association, the body representing local authorities, argued it had been an "excessive burden" on cash-strapped councils.The commission's inspection regime too was abandoned. The Local Government Association, the body representing local authorities, argued it had been an "excessive burden" on cash-strapped councils.
Red flagRed flag
One estimate suggested it had cost local and central government a total of £2bn each year.One estimate suggested it had cost local and central government a total of £2bn each year.
Before they were abolished, the inspections had grown into sprawling undertakings that aimed to give the public access to detailed information on how well services were being delivered in each part of England.Before they were abolished, the inspections had grown into sprawling undertakings that aimed to give the public access to detailed information on how well services were being delivered in each part of England.
For example, the Audit Commission ruled on how well local authorities were "working to ensure that all local people thrive economically" and "enabling everyone to make healthy lifestyle choices".For example, the Audit Commission ruled on how well local authorities were "working to ensure that all local people thrive economically" and "enabling everyone to make healthy lifestyle choices".
It distributed green flags to top performers, encouraging others to emulate their successes. The worst local authorities were shamed with red flags.It distributed green flags to top performers, encouraging others to emulate their successes. The worst local authorities were shamed with red flags.
This inspection regime now looks set to be replaced by a cheaper voluntary system of "peer review", where local authorities judge one another's effectiveness - a move championed by the Local Government Association.This inspection regime now looks set to be replaced by a cheaper voluntary system of "peer review", where local authorities judge one another's effectiveness - a move championed by the Local Government Association.
But MPs are concerned that poorly performing local authorities may slip through the net, and want the government to impose some safeguards.But MPs are concerned that poorly performing local authorities may slip through the net, and want the government to impose some safeguards.
'Past glories''Past glories'
There is even greater consternation about who will hire the auditors in future.There is even greater consternation about who will hire the auditors in future.
The government wants local bodies to take responsibility for this, establishing "independent" committees to choose between the various private-sector providers competing for work.The government wants local bodies to take responsibility for this, establishing "independent" committees to choose between the various private-sector providers competing for work.
In this way, it anticipates that costs will be driven down.In this way, it anticipates that costs will be driven down.
The total impact of these changes will save taxpayers £137m a year on average, the government believes.The total impact of these changes will save taxpayers £137m a year on average, the government believes.
But the ad hoc committee on the draft Local Audit Bill, comprising MPs with expertise in the field, is worried that the actual savings will turn out to be much lower.But the ad hoc committee on the draft Local Audit Bill, comprising MPs with expertise in the field, is worried that the actual savings will turn out to be much lower.
Once one-off savings like abandoning the inspection regime have been accounted for, savings will be as low as £2.4m per year, it says.Once one-off savings like abandoning the inspection regime have been accounted for, savings will be as low as £2.4m per year, it says.
While larger local authorities with bigger budgets may find it easy to adapt to the changes, the committee is concerned that the 9,800 smaller bodies, including parish councils and internal drainage boards, which have been entitled to low-cost services from the Audit Commission, will struggle to cope.While larger local authorities with bigger budgets may find it easy to adapt to the changes, the committee is concerned that the 9,800 smaller bodies, including parish councils and internal drainage boards, which have been entitled to low-cost services from the Audit Commission, will struggle to cope.
The principle that those commissioning the auditors should be independent from those being audited has "guided public sector audit for the last 150 years", the committee adds.The principle that those commissioning the auditors should be independent from those being audited has "guided public sector audit for the last 150 years", the committee adds.
The ad hoc committee heard from Lord Heseltine, the former Conservative Deputy Prime Minister, who has been watching with interest as members of his own party dismantle a part of his legacy that took a decade to build.The ad hoc committee heard from Lord Heseltine, the former Conservative Deputy Prime Minister, who has been watching with interest as members of his own party dismantle a part of his legacy that took a decade to build.
Making the case for the creation of the commission in 1982, he had told the Commons: "Because local authorities appoint their own auditors, audit is not seen to be obviously independent of local government."Making the case for the creation of the commission in 1982, he had told the Commons: "Because local authorities appoint their own auditors, audit is not seen to be obviously independent of local government."
By abandoning this principle, standards would slip, he suggested, since private sector providers of auditing services would "not want to get a reputation for being difficult".By abandoning this principle, standards would slip, he suggested, since private sector providers of auditing services would "not want to get a reputation for being difficult".
The Audit Commission, which as a monopoly provider was immune from such concerns, counts the exposure of serious wrong-doing at Westminster Council - which had sold off council homes in a bid to boost Conservative election prospects - as among its finest moments.The Audit Commission, which as a monopoly provider was immune from such concerns, counts the exposure of serious wrong-doing at Westminster Council - which had sold off council homes in a bid to boost Conservative election prospects - as among its finest moments.
The committee alleges that the government has paid insufficient attention to how private-sector firms might perform in similarly difficult circumstances, for instance by failing to to make it clear who would pay for the additional work involved in exposing malpractice.The committee alleges that the government has paid insufficient attention to how private-sector firms might perform in similarly difficult circumstances, for instance by failing to to make it clear who would pay for the additional work involved in exposing malpractice.
Many bodies would also struggle to recruit enough "independent" people to the panels to be charged with commissioning auditors, the committee suggested.Many bodies would also struggle to recruit enough "independent" people to the panels to be charged with commissioning auditors, the committee suggested.
Ultimately, the committee concluded, the role of commissioning auditors would be best left to a centrally run organisation, much like the rump Audit Commission.Ultimately, the committee concluded, the role of commissioning auditors would be best left to a centrally run organisation, much like the rump Audit Commission.
But Communities Secretary Eric Pickles is unlikely to be persuaded.But Communities Secretary Eric Pickles is unlikely to be persuaded.
"It was once a great organisation, and it did make a change to local government," he told MPs in 2010, explaining the reasons behind his policy."It was once a great organisation, and it did make a change to local government," he told MPs in 2010, explaining the reasons behind his policy.
His Labour counterpart in the Commons would enjoy "some considerable time living on past glories", he predicted.His Labour counterpart in the Commons would enjoy "some considerable time living on past glories", he predicted.
"But the Audit Commission cannot do that.""But the Audit Commission cannot do that."