It is not uncommon for local authorities to take umbrage at Audit Commission reports. The watchdog often finds itself under fire for imposing excessive bureaucracy, for being too negative or for publishing out-of-date information.
This is the usual tussle between watchdog and audited body. But the reaction to the commission’s report on Icelandic investments has gone far beyond familiar gripes.
Seven public bodies found themselves labelled ‘negligent’ in the report because they invested after September 30, 2008. The seven admit there were mistakes, but are aggrieved to be characterised in such a damning way.
The use of the ‘N’ word was described by Kent County Council as ‘extraordinary’, by the London Borough of Havering as ‘staggering’ and by the South Yorkshire Pensions Authority as ‘unnecessarily emotive’.
Negligent is not a word used lightly, and the commission must have realised it would cause a stir. But it took a tough line and has been applauded for so doing by the chair of the communities and local government select committee.
However, two things should give us food for thought. First, there are a further 120 authorities with money frozen in Iceland whose investments were made earlier – some of whom acknowledge that they broke their own treasury management policies. Secondly, there are accusations of the Millbank pot calling the kettle black.
The Audit Commission is in the embarrassing position of having invested £10m in Iceland, although it claims not to be ‘negligent’ itself.
It might be simply that the terminology is at fault. If the commission had employed more temperate language, a constructive debate could have ensued.
But now we have seven very irate authorities, while the deputy chair of the Local Government Association claims the commission is adopting the ‘perfect science of hindsight’.
Clearly, lessons need to be learned. CIPFA is reviewing its treasury management guidance, credit ratings agencies face greater regulation and many councils will have to examine their own policies.
But focusing so narrowly on the seven ‘guilty’ authorities is not the best way to prevent a recurrence of the Icelandic disaster.
