The commission must not be cowed, by David Walker

13 Dec 10
The Audit Commission has gone into tortoise mode since Eric Pickles and his teenage special advisers put the boot in. But the hyper caution must not lead auditors to pull their punches

Now that councils have their spending allocations, they will start budget making in earnest. With the financial sustainability of some of them problematic, district auditors will inevitably be thrust into the line of fire.

Communities secretary Eric Pickles’ recent instruction/request that councils raid their reserves shows how anxious Whitehall has become over financial flows. But what line will auditors take, confronted by gaps in the forward accounts and black holes in council budgets?

The Audit Commission has, unsurprisingly, gone into tortoise mode since Pickles and his teenage special advisers put the boot in. It does not seem to be in the state where it might, for example, repeat the exercise it conducted 18 months ago and assay the financial vulnerability of local authorities to the downturn.

But could the hyper-caution of Audit Commission HQ lead auditors to pull their punches as they look at how councils are coping? With spending commitments yet to be wrestled down, with Pickles insistent that councils do not allow council tax to take the strain (which would be normal at this point in the political and fiscal cycle), some local authorities face a significant imbalance in revenues and spending from April next year.

Pickles is telling Tory councillors to ‘unlock Fort Knox’ and push finance directors to take money out of reserves. That might work as a tactic in year one, but the cuts continue and when might balances be replenished? It’s unlikely the coalition is going to say in autumn 2011 it has suddenly become intensely relaxed about raising council tax.

Or is Pickles playing a political game, knowing that depleted reserves would become the responsibility of the Labour councillors likely to be elected to replace LibDems and some Tories in the contests taking place from next May onwards?

Either way, district auditors would in normal circumstances be keeping a close eye on flows of money and spending commitments, not just in 2011-12 but subsequently – and having a word with officials and even elected members, in public if necessary. But these are not normal circumstances.

Say an auditor issued a public warning. Just imagine how pleased Pickles would be at having the coalition’s spending plans implicitly criticised. Because auditors know this, and know how sensitive anything ‘political’ has become at Audit Commission HQ, there is a danger that they stay silent.

There’s a not dissimilar situation shaping up in health audit, too. As for primary care trusts, we have it on the authority of the chief executive of the NHS, David Nicholson, that they face administrative disarray. No coherent relationship can be established between their spending commitments and future revenues for the simple reason no one knows whence the money will flow nor to whom once PCTs are wound up – and some are winding up faster than others, as Andrew Lansley’s mega ‘dis’organisation gets going.

In such circumstances, an auditor would normally be asking questions, sending out warning notes, sounding publicly anxious. But to betray anxiety in local government or health might sound like questioning the government’s policies, or even the competence of ministers. No Audit Commission-appointed auditor wants to go anywhere near politics -- the observation applying to both private firms appointed by the commission and its own staff (who are in the throes of fitting themselves for a buy out or mutualisation – or redundancy).

Audit silence can be interpreted two ways. A quiet auditor might be a satisfied, vigilant auditor, who has examined the risks and is satisfied spending and revenues will continue to match. But a silent auditor might be a fearful auditor, reluctant to break ranks, cowed and disempowered.

David Walker is the former managing director for communications at the Audit Commission

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